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Citation: 2004TCC678
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Date: 20041021
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Docket: 2004-1288(IT)I
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BETWEEN:
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DOUGLAS K. VICKERS,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Beaubier,
J.
[1] This
appeal pursuant to the Informal Procedure was heard at Kelowna, British
Columbia on September 30, 2004. The Appellant testified. The Respondent called
two Canada Revenue Agency officers, Hannah Chesher, a collections officer, and
Laura Stolar, a trust examiner.
[2] The
particulars in dispute in the assessment of the Appellant for director's
liability respecting employee withholdings are set out in paragraphs 2 to 9 of
the Reply to the Notice of Appeal. They read:
2. By way of
Notice of Assessment No. 33975 dated April 3, 2003
("Assessment"), the Minister of National Revenue
("Minister") assessed the Appellant for $5,069.00 in respect of
unpaid Federal Tax, plus applicable interest and penalties payable by Horizon
Customer Retention Services Ltd ("Horizon").
3. The Appellant
filed a Notice of Objection to the Assessment on July 2, 2003.
4. In response
to the Appellant's Notice of Objection, the Minister confirmed the Assessment
as Horizon has not deducted, withheld or remitted the amounts as required by
subsection 153(1) of the Income Tax Act ("Act") and as
the Appellant was a director of Horizon, he is jointly and severally liable,
together with Horizon, to pay the amount and any interest and penalties under
subsection 22.1(1) of the Act. The Notification of Confirmation is dated
December 11, 2003.
5. In so
assessing the Appellant and confirming the Assessment, the Minister relied on
the same assumptions of fact, as follows:
a) Horizon
was incorporated on August 25, 1999;
b) at all relevant
times, the Appellant was the sole shareholder and director of Horizon;
c) Horizon
employed one person in the 1999 taxation year, Fenton Bolden
("Bolden");
d) Horizon
issued a 1999 T4 to Bolden showing that Bolden had employment earnings of $60,000.00,
with deductions of $1,186.50 for Canada Pension Plan ("CPP")
contributions, $994.50 for Employment Insurance ("EI") premiums and
$17,722.80 for Income Tax;
e) Horizon filed
the 1999 T4 return with the Minister on February 29, 2000 but did not make any
remittances to the Receiver General in respect of any of the deductions;
f) on June 5,
2000, the Minister assessed Horizon in respect of the unremitted deductions
along with the employer's portion in respect of both the CPP contributions and
the EI premiums, as well as applicable penalty and interest;
g) in the period
between June 5, 2000 and April 28, 2001, no payments were made by Horizon in
respect of the balance owing;
h) on or about
April 28, 2001, the Appellant advised the Collections Officer in charge of
collecting Horizon's debt that there was an error in the T4 that had been
filed for Bolden;
i) in the
period between April 28, 2001 and the end of November 2001, no payments were
made by Horizon in respect of the balance owing;
j) in late November
2001, the Appellant provided information to show that the original T4 issued to
Bolden for the 1999 year was incorrect;
k) a Trust
Examination was requested to verify the correct figures for the 1999 T4 and
that examination was completed by March 2002;
l) the June 5,
2001 Notice of Assessment issued to Horizon was cancelled;
m) an amended
1999 T4 was prepared for Bolden showing employment earnings of $35,275.00 with
deductions of $1,112.15 for CPP contributions, $899.53 for EI premiums and
$7,578.44 for Federal and Provincial Income Tax;
n) on April 26,
2002, a Notice of Assessment was issued to Horizon in respect of the revised
unremitted deductions along with the employer's contributions for both CPP and
EI and applicable penalty and interest;
o) Horizon
failed to remit to the Receiver General Federal Income Tax of $5,069.00 which
was deducted from the wages paid to Bolden in the 1999 taxation year;
p) Horizon
failed to pay penalty and interest relating to the unremitted Federal Tax of
$485.67 and $1,150.60, respectively;
q) a Certificate
for the amount of Horizon's liability for Federal Income Tax, penalties and
interest was registered in the Federal Court of Canada under subsection 223(2)
of the Act and execution for such amount has been returned wholly
unsatisfied; and
r) the
Appellant did not exercise the degree of care, diligence or skill to prevent
the failure to remit the said amount by Horizon that a reasonably prudent
person would have exercised in comparable circumstances.
B. ISSUES TO BE
DECIDED
6. The issue is
whether the Appellant is liable under subsection 227.1(1) of the Act for
the failure by Horizon to remit to the Receiver General an amount of Federal
Income Tax with related penalty and interest thereon as required by section 153
of the Act.
C. STATUTORY
PROVISIONS RELIED ON
7. He relies on
sections 153 and 227.1 and subsection 227(10) of the Act, as amended.
D. GROUNDS RELIED
ON AND RELIEF SOUGHT
8. He submits
that the Minister properly assessed the Appellant pursuant to sections 227 and
227.1 of the Act for the failure by Horizon to remit to the Receiver
General an amount of Federal Income Tax with penalties and interest thereon as
required by section 153 of the Act.
9. He submits
further that the Appellant did not exercise the degree of care, diligence and
skill to prevent the failure to remit the amount by Horizon that a reasonably
prudent person would have exercised in comparable circumstances.
[3] None
of the assumptions were refuted.
[4] The
Appellant's main dispute was that if the audit had been done earlier, the
withholdings could have been paid by Horizon. He had agreed (as the sole
shareholder and director) with Bolden to treat Bolden as an employee after the
year-end and had filed the T4s and Revenue Canada documents personally.
Therefore in his view he was not negligent.
[5] However,
Horizon had not paid the required instalments during the calendar year because
it was treating Bolden as a contractor. Once it agreed to treat Bolden as an
employee, the withholdings were due immediately – even though it was after the
calendar year. Thus Mr. Vickers' duty as a director was to see that they were
paid then and there. When he failed to do that he was negligent within the
meaning of sections 227 and 227.1 as summarized in paragraph 9 of the Reply.
[6] For
this reason, the appeal is dismissed.
Signed at
Saskatoon, Saskatchewan, this 21st day of October 2004.
Beaubier,
J.
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