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GST — director's liability (construction contractor)

My client was the sole director and shareholder of a small company that did construction subcontract work. He had left school after Grade 4 in Portugal to go to work, and came to Canada as an adult. He could barely read and write English.

The company was assessed for GST on amounts that it had invoiced but not collected. Several major customers had not paid its fees, and the company ended up going bankrupt without ever collecting these fees.

My client, as the director, was then assessed for the company's unremitted GST. At this point he was referred to me by his accountant.

I filed a detailed Notice of Objection, showing that the assessment of my client as director should be cancelled because he met the "due diligence" standard of having acted as a reasonably prudent person in attempting to have the company remit GST. In particular, I showed that it was reasonable for my client not to have known that GST must be remitted when invoiced (rather than when collected), especially since his bookkeeper, on whom he relied, had given him wrong advice. I backed up my submission with detailed reference to supporting case law.

The Revenue Canada Appeals Officer who reviewed my submission agreed with me. The assessment of my client for over $62,000 was cancelled.

Problem vanished!

(1997)