Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether an RESP can be seized pursuant to subsection 224(1).
Position: Yes.
Reasons: The funds in an RESP are available to the subscriber at any time, and the promoter is a person who is liable to make such a payment to the subscriber. As a result, the Minister may issue a Requirement to Pay, pursuant to subsection 224(1), to intercept any amount that the subscriber may request. In addition, funds in the RESP that emanate from Canada Child Tax Benefit payments are not protected from seizure.
May 15, 2013
Winnipeg Tax Services Office HEADQUARTERS
Income Tax Rulings
Directorate
Attention: Ed Szewchuk Lindsay Frank
Revenue Collections Division (613) 960-7919
2012-045928
Exigibility of Registered Education Savings Plans
We are replying to your inquiry concerning whether the Minister may serve a Requirement to Pay ("RTP") to seize the funds in a registered education savings plan ("RESP") for the purpose of applying them to amounts owing under the Income Tax Act (the "Act").
Subsection 224(1) of the Act permits the Minister to collect unpaid income taxes by serving an RTP on any person, who is, or will be, liable to make a payment to the tax debtor, and by requiring that person to pay the amount instead to the Receiver General on account of the tax debtor's liability.
Pursuant to section 146.1 of the Act, an RESP is an arrangement whereby funds are held in trust, and managed by a person or an organisation ("promoter") to accumulate income to be paid for the higher education of a beneficiary. The funds may consist of amounts paid by an individual ("subscriber") and government grants, namely, the Canada Education Savings Grant, the Canadian Learning Bond or any designated provincial education savings program. The funds are available to the beneficiary on enrollment in an institution of higher learning.
Notwithstanding that the funds are purportedly held in trust for a beneficiary, the subscriber has access at any time to the funds it contributed to the RESP, together with accumulated income payments. As such, the promoter is a person who is, or will be, liable to make a payment to the subscriber, in accordance with subsection 224(1). Therefore, it is open for the Minister to issue an RTP to the promoter where the subscriber is indebted for income taxes, thus requiring the trustee to pay out of the RESP the amounts actually contributed by the subscriber, in addition to any accumulated income payments.
It should be noted that where a subscriber contributed Canada Child Tax Benefit ("CCTB") payments to an RESP, such contributions will not be exempted from the operation of subsection 224(1). In MacKinnon v. Deloitte & Touche Inc., [2007] 2 C.T.C. 253, 30 C.B.R. (5th) 81, (Sask. Q.B.), it was held that such an exemption is lost when the funds are transferred to a non-exempt asset.
Should you have any questions or require additional information, please do not hesitate to contact Lindsay Frank at the number provided at the outset of this memorandum.
Terry Young CA
Manager
Administrative Law Section
International Division
Income Tax Rulings Directorate
c.c. Guy Lafrance
Director
Accounts Receivable Tax Programs Division
Michael Wolff
Legal Services
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