Northshore

Accountants & Advisors

Business Advice

Make up your mind

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The taxpayer had income from doing interpreter/translator work.  The taxpayer claimed some of it was employment income and some of it was business income.  This allowed him to claim business expenses on some of it and the Canada Employment tax credit on the rest.  On the portion that the taxpayer called employment income, it was determined he was not part of the employee benefits plan nor was paid like an employee.  The Tax Court looked at things like ownership of tools, chance of profit, risk of loss, and integration of services and determined all his services were part of his regular business activity and not employment related.

Employee or Contractor

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When you hire somebody, or get hired, a gray area sometimes surfaces as to whether you are an employee or a contractor (aka sub-contractor or self-employed).  Both parties quite often see it as a contractor role but the CRA prefers it to be an employee relationship.  Why?  They collect payroll taxes from employees AND employees do not get to write-off expenses incurred to generate that income.

The Wiebe Door case previously established that this determination be based on 1) control, 2) ownership of tools, 3) chance of profit, and 4) risk of loss.  A more recent case was brought forward arguing the intention of the parties has to be considered as well.  The Tax Court agreed as long as the four factors of the Wiebe Door case were not sufficiently strong enough to overcome the “intention” of the parties.

In this court case, both the company and its driver had clearly considered this a contractor relationship and the Court agreed.

Storage fees as a business deduction?

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A lawyer retired after 27 years.  As required by her professional liability insurance company, she had to retain client files.  CRA initially disallowed the deduction.  The Tax Court found that she had built into her client fees a certain amount to cover the cost of storage.  As she had reported this income, it was only fair she be allowed to write-off her costs now.  The Tax Court also felt the amount claimed was reasonable.

Really a business?

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The taxpayer reported losses on two rental properties he owned.  The CRA disallowed the losses reported for the 2005 through 2011 tax years.  The Tax Court agreed finding the taxpayer was just trying to recover some of his expenses.  He did not conduct the operation in a business-like manner and he had not shown a profit in the six years under review.

Reasonable business expenses

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Reasonable business expenses

A business claimed a lot of tech type expenses due to the nature of his “remote” and “online” services.  The CRA audited these higher than usual expenses.  The agreed with the taxpayer these expenses were incurred in his pursuit of profits. 

However, they disallowed most of the automobile expenses as they determined the “remote” and “online” nature of the businesses left very little need for an automobile.