Director's Liability Provisions in GST/HST Law Is Not Restricted To 4 Year Limitation Period
Yesterday I wrote about the Tax Court of Canada decision in Siow v. The Queen and about the appellant's winning arguments. Today, I will talk about the elements of the case that the appellant, a director of the corporation, lost. in the final analysis, the Tax Court of Canada found that the director, Siow, was liable under the director's liability provisions. This decision was made after the Court found that the underlying notice of assessment against the corporation had not been sent.
The director argued that since the underlying assessment against the corporation was invalid and that he should not be assessed as the director because the 4 year limitation period had expired (to assess the corporation). The Tax Court of Canada disagreed as said:
I cannot agree that such provision limits the period for assessing a director under section 323 to the same four-year limitation period applicable against the Corporation for two reasons.
The Court's reasons included:
1. The Federal Court of Appeal had previously determined subsection 298(1) of the Excise Tax Act does not apply to directors’ liability assessments (Kern v. Canada, 2006 FCA 257, 2006 DTC 6502 (FCA));
2. The Federal Court of Appeal recently held that a director’s liability assessment made over ten years after the underlying Corporation was assessed was acceptable (Jarrold v. Canada, 2010 FCA 278, [2010] G.S.T.C. 158 (FCA));
3. The Federal Court of Appeal recently held the only statutory time limit imposed on the Minister for assessing a person under section 323 of the Excise Tax Act is found in subsection 323(5), two years after the person last ceased to be a director of the corporate tax debtor (Jarrold v. Canada, 2010 FCA 278, [2010] G.S.T.C. 158 (FCA)); and
4. The rules of statutory interpretation would support the finding subsection 323(1) of the Excise Tax Act has its own limitation period and is clear in not identifying any other period.
As result, the Tax Court held that the CRA was not bound by the 4 year limitation period. A director may be assessed any time (except a director cannot be assessed more than 2 years after he/she ceased to be a director).
This is an important lesson for director's to learn --- and is a warning. Director's can be chased for years and, therefore, it is important to exercise due diligence in ensuring corporations pay their GST/HST debts.
Tomorrow's post will discuss the Court's position on why a director can be assessed when the corporation cannot be assessed.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
