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GST — liability of charitable institution for unremitted GST

A well-known public institution had not accounted for GST properly over several years. As a charity, it was supposed to remit 60% of its GST collected, without claiming input tax credits (ITCs). Instead, it had claimed significant ITCs for several years.

The institution's accountants, Ernst & Young, advised the institution that it needed to set aside $150,000 as a provision for GST owing. I was asked to see if I could reduce the amount owing.

I determined that there were a number of things that could be done. First, I figured out that the institution qualified to file an election to be able to claim ITCs rather that remitting 60% of GST collected, because it sold some items from its gift shop for delivery to the U.S. every year. I asked the CRA to allow the institution to backdate this election by three years.

Second, I figured out a way to enable the institution to claim ITCs for 85% of the GST it had been charged over those years based on a calculation of the floor space used for public exhibitions, and the fact that admission charges to the public were taxable. I wrote up a careful analysis explaining this method and citing supporting case law to show that the institution was entitled to choose this method of ITC apportionment.

Third, I identified that the institution had not been correctly collecting GST on certain of its charges, including some membership fees. I analyzed which fees should be taxable and which should not, and prepared a submission showing how much GST had been under-collected.

Finally, I put all of this together in a "no-names" Voluntary Disclosure to the CRA. I negotiated with a CRA Voluntary Disclosure Officer to accept this disclosure, allow the institution to make the election late, and allow the ITC apportionment. Once we had a deal, I disclosed the institution's name and made arrangements for it to remit the GST owing.

The institution ended up having to remit $17,780, instead of $150,000. Its board of directors was delighted.

(2003)