Citation: 2006TCC380
Date: 20060711
Docket: 2005-3406(GST)I
BETWEEN:
SHAWN BELLEFLEUR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[OFFICIAL ENGLISH TRANSLATION]
Angers J.
[1] The Appellant is appealing the refusal by the Minister of National Revenue (the "Minister") to grant his application for a goods and services tax (GST/HST) rebate for new housing. In fact, it is question of renovations done to the Appellant's house and the issue is to whether the renovations performed by the Appellant constitute "substantial renovation" under the definition of this expression at subsection 123(1) of the Excise Tax Act (the "Act"). Subsection 256(2) of the Act grants the right to the rebate claimed by the Appellant.
[2] These are the legislative provisions applicable in this matter:
256. (1) In this section,
"single unit residential complex" includes:
(a) a multiple unit residential complex that does not contain more than two residential units, and
(b) any other multiple unit residential complex if it is described by paragraph (c) of the definition "residential complex" in subsection 123(1) and contains one or more residential units that are for supply as rooms in a hotel, motel, inn, boarding house, lodging house or similar premises and that would be excluded from being part of the residential complex if the complex were a residential complex not described by that paragraph.
"Rebate" for owner-built homes
(2) Where:
(a) a particular individual constructs or substantially renovates, or engages another person to construct or substantially renovate for the particular individual, a residential complex that is a single unit residential complex or a residential condominium unit for use as the primary place of residence of the particular individual or a relation of the particular individual,
(b) the fair market value of the complex, at the time the construction or substantial renovation thereof is substantially completed, is less than $450,000,
(c) the particular individual has paid tax in respect of the supply by way of sale to the individual of the land that forms part of the complex or an interest therein or in respect of the supply to, or importation by, the individual of any improvement thereto or, in the case of a mobile home or floating home, of the complex (the total of which tax under subsection 165(1) and sections 212 and 218 is referred to in this subsection as the "total tax paid by the particular individual"),
(d) either
(i) the first individual to occupy the complex after the construction or substantial renovation is begun is the particular individual or a relation of the particular individual, or
(ii) the particular individual makes an exempt supply by way of sale of the complex and ownership of the complex is transferred to the recipient before the complex is occupied by any individual as a place of residence or lodging,
the Minister shall, subject to subsection (3), pay a rebate to the particular individual equal to
(e) where the fair market value referred to in paragraph (b) is not more than $350,000, the lesser of $8,750 and 36% of the total tax paid by the particular individual before an application for the rebate is filed with the Minister in accordance with subsection (3), and
(f) where the fair market value referred to in paragraph (b) is more than $350,000 but less than $450,000, the amount determined by the formula
A × [($450,000 - B)/$100,000]
where
A is the lesser of $8,750 and 36% of the total tax paid by the particular individual before an application for the rebate is filed with the Minister in accordance with subsection (3), and
B is the fair market value of the complex referred to in paragraph (b).
[3] Subsection 123(1) reads, in part, as follows:
"Substantial renovation" of a residential complex means the renovation or alteration of a building to such an extent that all or substantially all of the building that existed immediately before the renovation or alteration was begun, other than the foundation, external walls, interior supporting walls, floors, roof and staircases, has been removed or replaced where, after completion of the renovation or alteration, the building is, or forms part of, a residential complex.
[4] The Appellant started his renovations in July 2003. It is not contested that the building is a single-unit residential complex used by the Appellant and his family as their habitual residence. Work was completed around March 4th of the following year.
[5] The residence is located at Memramcook, in New Brunswick. It is a two-storey residence that, before the renovations, had 1,260 square feet of living area. On the ground floor, there was a living room and a dining room, a kitchen, a washroom with a laundry room, a bedroom, a vestibule and a stairway leading to the second floor. On this floor, there was a full bathroom and two bedrooms.
[6] The Appellant contracted his renovations to a firm of specialized contractors. The cost of the renovations, according to the contract, was $65,000 including HST. The details of the work assigned and done to the Appellant's residence are found in Exhibit A-1. The work consists mainly of the addition of a double garage to the existing house and, on the second floor, a bedroom and a family room. On the ground floor, a veranda was added to the main entrance of the house, two windows and a door were taken out of the wall adjacent to the double garage that was added to the house, a vestibule was added behind the new garage and the laundry room was enlarged.
[7] On the second floor, there is now a new bedroom, as well as the family room above the garage. The existing two bedrooms and full bathroom remain. The window in the wall where the garage was built was taken out. Three closets were built and added to the second floor.
[8] On the ground floor and on the second floor, the Appellant did electrical, plumbing and painting work, and built a structure integrating the new part to the existing part. The Appellant replaced his heating system with an electrical heating system. The windows were replaced and the exterior covering of the old and new parts of the house was redone. This addition, not including the garage, added 682 square feet of living area to the existing part.
[9] The Appellant filed photos showing his residence before and after the renovations, as well as sketches representing the premises before and after.
[10] The Appellant submitted his rebate application on March 5, 2004. There is no doubt that the processing of his application was somewhat slow and frustrating for him. The Appellant studied the application form as well as the guidelines issued by the Department to assist claimants, and any other publication he could find. According to him, he meets all the requirements mentioned in these documents, although he acknowledges that it is sometimes difficult to reconcile everything that is published. On this last point, suffice it for me to note that the application form indicates in section C that the claimant must check off whether a major addition is involved. The Act does not refer to this category. It only refers to a rebate to an individual where there is construction of a new residential complex or substantial renovation to such a residential complex. An addition therefore must be part of the substantial renovation and treated as such.
[11] The only issue therefore is the one identified at the beginning hereof. For the renovation to be qualified as substantial, is must correspond to the definition found in the Act. Therefore, all or nearly all of the building must be removed or replaced, except for the foundation, the extenal walls, interior supporting walls, floors, roof and staircases.
[12] The description of the renovation work done at the Appellant's house does not correspond with the definition of "substantial renovation". In fact, the existing part of the house was barely modified, if not for the installation of a new heating system and the replacement of the windows and exterior covering.
[13] In my opinion, the issue is rather whether the addition of the garage, a family room and a bedroom in the new part makes it possible to conclude that the pre-existing house was incorporated into a new residence or if these additions were incorporated into the pre-existing house. This determination is taken from Erickson v. The Queen, [2001] G.S.T.C. 19, in which Hershfield J. of this Court was called upon to decide whether an addition to a residence constitutes construction of a new residential complex or building or if it is simply the renovation of a residential complex by adding a new part.
[14] Hershfield J. acknowledged that the Act does not mention additions. Taking into consideration the Federal Court of Appeal's comments in Sneyd v. The Queen, [2000] G.S.T.C. 46, on the provisions concerning GST rebates, Hershfield J. concluded that an addition does not qualify for a GST rebate unless the addition incorporates or conserves the pre-existing building such that the addition essentially constitutes a new residential complex and the pre-existing part becomes a minor part of the new residential complex. He held that the addition of a double garage, even if it doubled the living area, amounted to significant renovations, but insufficient to fit the definition.
[15] I agree with the remarks of Hershfield J. In this case, in my opinion, the renovations and the addition of a new part to the Appellant's pre-existing residence do not constitute a new building to the point where it would be possible for me to conclude that the pre-existing part was consumed and only forms a minor part of a new residence. For these reasons, the appeal is dismissed.
Signed at Edmundston, New Brunswick, this 11th day of July 2006.
Translation certified true
on this 9th day of January 2007.
Gibson Boyd, Translator
Email this Content