Recent Changes to Small Business Deduction - Corporate Farm or Fishing sales to Co-ops - Some relief proposed.

On May 5, 2017, the Department of Finance proposed changes to the new rules relating to the multiplication of the small business deduction. Applicable to taxation years that begin after March 21, 2016, these proposals aim to ensure that a farmer’s or fisher’s corporation selling farming products or fishing catches to an arm’s length agricultural or fisheries cooperative is not inappropriately denied access to the small business deduction.

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 428

 

Hockey and Tax – What happens when the rules change?

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by Caitlin Butler CPA, CA

Consider this… Two teams, two coaches and a few referees participating in a good old hockey game. All, by and large, understand the rules and if someone fouls, the ref calls it and penalizes. This is analogous to taxes – the players are taxpayers, coaches are advisors and CRA is the referee trying to administer the tax rules as drafted by the Department of Finance.

Normally, what happens when the rules change? Players, coaches and the referees learn the changes, suggest tweaks to make them more efficient, and then they comply. The game carries on.

What happens if the rule changes are so convoluted and complicated that the coaches, players or referees cannot fully understand them or apply them to their situation? Potentially a lot of things, many of which are not good for anyone involved, including the good old hockey game.

Perhaps, players and coaches take advantage of the ambiguity and push the envelope. Some may play it particularly safe so as to not offend. Some may get frustrated and stop playing. Others may completely disregard the rules, but continue playing. The refs are left to deal with the chaos. Bottom-line – the quality of the game suffers greatly.

It doesn’t seem fair to anyone involved – taxpayers, advisors, CRA or the observers of the game.

This is how I, and many others, that have carefully analysed the proposed tax changes, perceive the impact. Without clarity and simplicity, one can’t fully comply as intended. All involved are set up to fail. How does that impact the overall integrity of Canada’s self-assessment tax system?

Regardless of your position on the policy behind the proposals, I think we can all agree on one thing – the rules must be clear and understandable. At a minimum, provide taxpayers the opportunity to comment and comply. The proposals, as drafted, don’t do this.

If there is too much tripping or abuse in the game, changes the rules.  But, make sure that they are clear enough so that the game doesn’t freeze in confusion, or worse.

Let’s slow down and clarify the rules so that the game can go on.

Thanks.

 

If you want better dialogue and consultation, consider signing this petition.  https://www.videotax.com/petition

Billed-Basis Accounting - CRA opines the elimination of WIP election will not impact bona fide contingency fees.

On April 28, 2017, CRA updated its website to provide a FAQ on the 2017 Federal Budget proposal to remove the election for professionals to value work in progress at nil, however, it also discussed the issue of contingency fees. The Release noted:

All or a portion of a designated professional’s fees may only become known and billable at some time after the taxation year in which the professional provided services under the arrangement (e.g., where, under the terms of a written contingency fee agreement between a personal injury lawyer and a client, legal fees are only billable by the lawyer on a periodic basis as amounts are received by the client under a negotiated settlement or a Court Judgment).

Until such time, there is often no liability on the professional’s client to pay any fee; consequently, no amount is receivable by the professional until the right to collect the amount is established. Under these circumstances, for purposes of determining the value of the professional’s work in progress at the end of the year, no amount would normally be recognized.

As a result, the proposed change is not expected to have any impact on these types of contingency fee arrangements where the terms and conditions of such arrangements are bona fide.

Editors’ Comment
Some practitioners have opined that the administrative concession relating to contingency fees has little or no basis in law. As such, practitioners should be cautious placing reliance on these administrative comments. As these changes proceed through the legislative process, the treatment of contingency fees will hopefully be clarified.

For further information see Video Tax News Monthly Tax Update Newsletter, Issue No. 430

LIVE video event Thursday! "Taxing Small Corporations: Increasing Fairness or Undermining Growth?"

Live Stream from The School of Public Policy University of Calgary, September 14, 2017, 8:00am - 9:30am MDT


Video Tax News is honoured to present the LIVE Stream of this critical discussion about proposed changes to the tax code.

Nationally renowned supporters and defenders will go head-to-head in this spirited debate.


Featured Speakers:

  • Jack Mintz, President’s Fellow, The School of Public Policy
  • Kevin Milligan, Professor of Economics, Vancouver School of Economics
  • Kim Moody, Director, Canadian Tax Advisory, Moodys Gartner Tax Law
  • Richard Truscott, Vice-President BC and Alberta, Canadian Federation of Independent Business

The federal Finance Minister recently proposed changes to the tax code, raising concerns for many small incorporated business. The Finance Minister argues that owners of Canadian Controlled Private Corporations have an unfair tax advantage, since they can store money in their businesses without that money being immediately subject to income tax. But many owners of small corporations argue that being able to store funds in their business is necessary for business planning and that the proposed changes will disincentive hard work and growth.

Join The School of Public Policy for an expert discussion on these changes, and their impacts not only on business owners, but the economy overall. This discussion matters, since it will form the basis of a formal submission and recommendations to the Department of Finance.

 

Attend live! Tickets at https://www.policyschool.ca/events/ta...