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: Does CRA examine an employer's payroll remittance or GST/HST accounts after a CPP/EI Ruling is completed?
Position: General comments.
Reasons: A referral to examine the other accounts is sent in specific situations and solely to ensure compliance from the employer.
2019 STEP CRA Roundtable – June 7, 2019
QUESTION 15. CPP/EI Rulings
Many small businesses hire “contractors” to assist in the day-to-day business operations. It is a question of fact whether the CRA considers such “contractors” to be employees or self-employed workers. Accordingly, in order to reduce withholding risks, many small business owners request a ruling from CPP/EI to ensure proper treatment. However, some STEP members have recently become aware that the CRA has an internal policy of conducting a trust account examination (for example payroll and GST HST remittance accounts), after a ruling determination. This trust examination can result in additional ruling requests along with additional payroll taxes, interest and penalties, and the possibility of additional professional fees associated with representations to the CRA. Can the CRA confirm that it is indeed their internal policy to review trust accounts of the payer after a CPP/EI ruling has been completed?
A CPP/EI ruling is an official decision that an authorized officer of the Canada Revenue Agency (CRA) makes. It confirms whether a worker is an employee or is self-employed, and whether the worker’s employment is pensionable or insurable for purposes of the Canada Pension Plan and the Employment Insurance Act. A payer can ask the CRA for a ruling if they are not sure whether they should deduct CPP contributions and EI premiums from a worker’s pay. And a worker can also request a ruling to ask whether CPP contributions and EI premiums should be deducted from their pay.
The responsibilities of the payers are different if the CRA determines that there is an employer/employee relationship or if the worker is self-employed. Employers are liable for deducting and remitting the income tax, Canada Pension Plan contributions, and employment insurance premiums on the wages made to the employees if the employment is determined to be pensionable or insurable, or both.
When the CPP/EI Rulings Division receives a ruling request from a payer or a worker, it does not automatically send a referral to the Trust Accounts Examination Division after the ruling is completed. A referral is sent in specific situations and solely to ensure compliance from the employer. For example:
- If the ruling changed the employment status of the worker from self-employed to employee or from employee to self-employed
- If, after examining all the circumstances of the employment of a worker who is related to the employer, the CRA determined that they were dealing at arm's length and that the employment was insurable, but the employer did not remit EI premiums for the worker
- Or for example if the ruling confirmed there was an employer/employee relationship and no source deductions have been made and the payer has not reported the wages or issued T4 slips in the name of the worker
As per the established policy, when the Collections and Verification Branch receives a referral from the CPP/EI Rulings Division for a completed ruling, the employer account is assigned for a trust accounts examination. The examination officer will contact the employer for an appointment so that the officer can examine the employer’s payroll books and records. The examination officer is to confirm/validate that the employer has deducted and remitted the required CPP and/or required EI for the ruled employee for the period stated in the CPP/EI Rulings Division’s letter that was sent to the employer.
When a trust accounts examination referral is received from the CPP/EI Rulings Division for a payroll examination, the examination officer will also review the GST/HST account on the CRA database to determine whether there are any outstanding returns. If the GST/HST account is non-compliant, the examination officer will then examine the employer/registrants payroll and GST/HST books and records.
Response prepared by:
CPP/EI Rulings Division
Legislative Policy and Regulatory Affairs Branch
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