DEADLINES

Corporations with an OCTOBER year end, claiming the small business deduction must pay the balance of tax owing by the end of JANUARY.

Corporations with a NOVEMBER year end, not claiming the small business deduction must pay the balance of tax owing by the end of JANUARY.

NOTE - INTEREST ON LATE OR INSUFFICIENT INSTALMENTS IS CHARGED AT 10%

JULY year ends must be filed by the end of JANUARY

New trust reporting requirements

Reporting for existing trusts will be time-consuming but not difficult. The fly in the ointment is "bare trusts" which may exist without the participants even being aware of it.

The term "bare trust" is not defined in the Income Tax Act. However, a bare trust for income tax purposes is a trust arrangement under which the trustee can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust's property.

A trustee can reasonably be considered to act as agent for a beneficiary when the trustee has no significant powers or responsibilities, the trustee can take no action without instructions from that beneficiary and the trustee’s only function is to hold legal title to the property. In order for the trustee to be considered as the agent for all the beneficiaries of a trust, it would generally be necessary for the trust to consult and take instructions from each and every beneficiary with respect to all dealings with all of the trust property.

A common example of a situation where a bare trust arrangement can exist is when, for privacy reasons, a property developer establishes a bare trust arrangement that will hold registered title to real property, while the developer retains beneficial ownership.

So you should first confirm if a bare trust exists after which, the following information will be required if this is the fist year the bare trust is filing a return:

• copy of the trust agreement

CRA recognizes that in the absence of formal document, the following will apply:

As many different arrangements can be trusts, if there are no written documents for the trust, please submit a written summary (typewritten or legibly printed) of the nature of the trust arrangement, including the title "Summary of [enter trust name]". The written summary should include the date of creation of the trust and the full names of the trustees, settlor and beneficiaries.

Bare trusts will have to apply for a trust number for a return to be filed.

It is incomprehensible how CRA is going to deal with this tsunami of information and what they plan to do with it.

No change in CRA rules is complete without penalties! These penalties are equal to the greater of CA$2,500 or 5% of the highest total fair market value of all property held by the trust in the year and $25 a day for each day the return is late, from a minimum of $100 to a maximum of $2,500 if there is a balance due.

CRA will provide relief to bare trusts by waiving the penalty payable under subsection 162(7) for the 2023 tax year in situations where the T3 Return and Schedule 15 are filed after the filing deadline.

Read more details here.

Apply for a trust number - Fillable PDF (t3app-fill-23e.pdf)

Enhanced Canada Pension Plan contributions

CPP premiums are increasing every year starting in 2024. The maximum earnings that qualify for "normal" CPP is $68,500 for 2024. In addition, wages in excess of this amount to a maximum of $73,200 will pay an additional $188 ($73,200 - $68,500 = $4,700 x 4%). In 2025, maximum wages for CPP contributions will be approximately $79,400. This initiative is expected to by fully in place by 2064 - 40 years from now!

Check out the fine print here.

Claiming business expenses

CRA has been relentless in pursuing corporate and personal tax payers to justify automobile and promotion expenses. Detailed travel logs and receipts to support any claim form advertising, promotion, motor vehicle, food, beverages and entertainment expenses. Receipts have to be categorized, sorted and in agreement with the amount claimed for tax purposes.

Automobile expenses claimed need to be supported by the bill of sale or lease, kilometres driven for business including destination. Promotion deduction must be supported by name, address, telephone number and business affiliation of the client.

This is a money maker for CRA as many taxpayers do not maintain adquate records. One way to effortlessly track your driving is MileIQ. Check out their video and see if this is right for you. Typically you drive to promotion and business events. This could be a game changer.

Enhanced First-Year CCA: Phase-Out After December 31, 2023

Over the past several years, several incentives permitting enhanced CCA claims in the year property first becomes available for use have been implemented. Claiming the enhanced first-year CCA provides a tax deferral by accelerating the deduction. The phase-out of these incentives will begin for assets that become available for use after December 31, 2023.

Immediate expensing property (IEP)

Many capital assets, other than those with particularly long lives (such as buildings), are eligible IEP. This includes assets used in a business such as vehicles and equipment. CCPCs that acquire IEP that becomes available for use by December 31, 2023, can claim up to 100% CCA on the IEP. The same end date applies to property acquired by eligible Canadian partnerships that had at least one member that was not an individual. No claim is available under this provision after this date.

For individuals and other eligible Canadian partnerships (where all members are eligible individuals), the property must be made available for use by December 31, 2024.

Accelerated investment incentive property (AIIP) – general

Most capital assets are eligible AIIP. AIIP property that is not manufacturing and processing (M&P) or clean energy equipment is eligible for triple the usual CCA claim available in the year of acquisition. For property that becomes available for use after December 31, 2023, this will decline to twice the usual CCA available in the first year. For property made available for use after December 31, 2027, no enhancement will be available.

Zero-emission property and manufacturing and processing (M&P) or clean energy equipment

The 100% CCA deduction applicable to zero-emission vehicles, zero-emission automotive equipment and AIIP that is either M&P or clean energy equipment is only available for property that becomes available for use by December 31, 2023. Property that becomes available for use by December 31, 2025 will be subject to a maximum 75% first-year CCA deduction. Property that becomes available for use in the following two years will be subject to a 55% maximum