News of Note

Hydro-Québec (2018 FC 622) found that an s. 231.2 requirement for information concerning a large grouping of Hydro-Québec customers should not be authorized pursuant to s. 231.2(3) on the grounds inter alia that they did not constitute an “ascertainable group.” In 2019, CRA provided an essentially identical requirement to Hydro-Québec, and the Minister’s motion for authorization of this requirement pursuant to s. 231.2(3) was dismissed at 2021 FC 1438 because the matter was res judicata.

In reversing this decision, and remitting the matter to the Federal Court for a determination as to whether the s. 231.2(3) authorization should be granted, Goyette JA noted that s. 231.2(3) conferred a discretion on the Federal Court, which “indicates that this is not the usual situation of a judge applying the Act in light of the facts before the court”. Furthermore, one could envisage situations in which CRA in proper fulfilment of its audit obligations could make a subsequent demand for information that was very similar to a previous one in order to respond appropriately to new information learned during the audit.

She provided further reasons in support of allowing the Crown's appeal, but her colleagues (Boivin and LeBlanc JJA) indicated that they did not endorse those reasons.

Neal Armstrong. Summary of Canada (Canada Revenue) v. Hydro-Québec, 2023 CAF 171 under s. 231.2(3).

The appellant agreed in July 2016 to purchase a new home for $413,847, but by the time of the closing in March 2018, he had lost his source of employment income and broken up with his partner. He nonetheless closed with financial assistance from his parents and from a private mortgage. He did not consume any meals at the residence, and only stayed there for approximately two nights per week. The only housekeeping items on the premises were a mattress, sheets and pillows and a table. He eventually sold the residence for $455,000.

Rossiter CJ found that, although the appellant satisfied the requirement under s. 254(2)(b) of the GST/HST new housing rebate rules that, at the time of agreeing to purchase, he had intended to occupy the residence as his primary place of residence, he had not satisfied the requirement under s. 254(2)(g) that he had in fact occupied the residence as a place of residence, stating:

[O]ccupancy is something more than simply having a mattress with a set of sheets and pillowcases and a table on the premises. Although the Appellant did some measure of staying at the premises in question, two nights per week, this certainly could not classify one as occupying the premises.

Rossiter CJ went on to note that the appellant continued to live most of his time with his parents, where he kept most of his personal effects and mailing address. He accepted the “frustrating event” doctrine, but stated:

To invoke frustration, the surrounding circumstances must make the frustrating event unforeseeable, beyond the buyer’s control, and deny the buyer any alternative pathway to having the property be their primary residence … .

That test was not satisfied here.

Before denying the rebate on the above grounds, Rossiter CJ, rejected the Crown’s argument that s. 254(2)(g) required the appellant to have occupied the property as his “primary place of residence” given the telling contrast between the wording of s. 254(b) (referring to a “primary place of residence”) and s. 254(g) (referring only to a “place of residence”.)

Neal Armstrong. Summaries of Sindhi v. The King, 2023 TCC 102 (Informal Procedure) under ETA s. 254(2)(g) and Statutory Interpretation – Consistency.

In somewhat general terms, the numerical limit in the s. 118.1 definition of ”total gifts” as to the amount of an individual’s total charitable gifts for a year that will qualify for credit is increased (under Variable B of the definition) by 25% of the individual’s taxable capital gains for the year in respect of gifts made in the year whose eligible amount is included in the charitable gifts total (so that the normal 75%-of-income limitation is increased in this regard to 100%).

An individual settles a charitable remainder trust (CRT) with capital property and gifts the remainder interest in the CRT to a qualified donee that is a registered charity, with the eligible amount of such gift being included in the individual’s “total charitable gifts.” CRA indicated that since the gift was of an equitable interest in the CRT and not of the capital property with which the trust had been settled, the taxable capital gain arising on the settlement of the CRT did not increase Variable B.

Neal Armstrong. Summary of 10 March 2023 External T.I. 2022-0943881E5 under s. 118.1(1) – total gifts – (a)(iii).

CRA has issued a Notice outlining its position on when services provided by intermediaries to insurers may be exempted as financial services. Examples covered include:

• Example 1: the services of a managing general agent to an insurer of marketing the insurer’s policies through independent sales agents, are exempted “arranging for” services under para. (l) of the financial services definition.
• Example 2: a third-party administrator (“TPA”) designs and handles employee benefit plans, which it markets to employers, with coverage from insurer who pays it a commission which is exempted under para. (l).
• Example 4: this is similar to Example 2 except that the contract with the insurer is split into two contracts, one of them for admin services – but this makes no difference to the result in light of the single-supply doctrine.
• Example 6: a non-licensed insurer covers any major collision or theft loss of new car purchasers who enter into a contract with it – given that it is not a licensed insurer, this contract is not considered to be the provision of an exempt insurance service (although such corporation’s coverage, in turn, from the insurer is exempted). (Under Example 5, there is a better result if the corporation distributes insurance coverage of the insurer to the car customers.)
• Example 7: an insurance claims adjudication and settlement system of the corporation is provided to the insurer on a taxable basis (predominantly admin services).

Neal Armstrong. Summaries of GST/HST Notice 325 Services Provided by Certain Insurance Intermediaries July 2023 under ETA s. 123(1) – financial service – para. (l), para. (d).