2437299 Ontario – Tax Court of Canada finds that major renovations that did not largely “gut” the buildings were not “substantial renovations”

Russell J found that the appellant had not substantially renovated two Ontario properties, so that their sale was not made by it as a “builder” and were not subject to HST under ETA Sched. V, Pt. I, s. 2.

In determining whether there was substantial renovation of each property, both parties accepted the use of the second of the three methods referred to in GST/HST Technical Information Bulletin B-092 for measuring “substantial” (with 90% appearing in B-092 as the minimum percentage for a property to be considered as having been “substantially renovated”). That method was comparing the total area of renovated floor and wall spaces to the building’s total area of floor and wall spaces.

In applying this method, Russell J accepted that:

“[F]looring” in the definition must mean “sub-flooring” as distinguished from whatever flooring was installed covering over the sub-flooring. … Putting down a new carpet, or new laminate wood flooring … [is not] sufficiently significant to contribute to whether a building might be said to have been “gutted.”

He went on to find in light of these findings (including that the buildings had not been “gutted”) and a further finding that some of the rooms in the buildings had been left largely untouched, that neither building had been substantially renovated.

Neal Armstrong. Summary of 2437299 Ontario Inc. v. The King, 2023 TCC 165 under ETA s. 123(1) – substantial renovation.