September 21, 2020
All Tax Articles

Construction contractors beware! The CRA has ways to find you.

The Federal Court of Appeal has continued to allow the CRA to find construction contractors who are not reporting all their income. (Residential contractors are notorious for doing renovations for cash and not reporting all their income and GST/HST.)

In Roofmart Ontario Inc. v. Canada, 2020 FCA 85, the CRA issued a Requirement for Information to Roofmart, a major Canadian supplier of roofing and building materials, to disclose details of all its customers who spent at least $20,000 per year at Roofmart from 2015-2017, or $10,000 in the first six months of 2018. Unlike consumers, contractors normally have accounts at building-supply stores that allow them to buy materials at a discount. This means that the stores keep records identifying these customers and their purchases, even if they pay cash.

The CRA brought this application in Federal Court and Roofmart resisted it. The Federal Court granted the application in 2019. Roofmart argued that the CRA must be currently engaged in an audit of the target group, but the Court disagreed. The request was legitimately made for audit purposes.

Roofmart appealed further, to the Federal Court of Appeal. The Court of Appeal has now confirmed that the order issued was appropriate, and there was no requirement for the CRA to have an existing audit underway or pending. As well, the customers whose names were sought were an “ascertainable group”. Therefore, Roofmart must comply.

Contractors who use Roofmart may wish to consider using the CRA’s Voluntary Disclosure Program to disclose unreported sales and GST/HST, so as to eliminate most penalties and the possibility of criminal charges. Once the CRA starts an audit, it will be too late for a voluntary disclosure.

This letter summarizes recent tax developments and tax planning opportunities from a third-party affiliate; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this blog post, which are appropriate to your own specific requirements. Please feel free to get in touch with Lee & Sharpe to discuss anything detailed above, we would be pleased to help.
Douglas K. DeBeck

Hello, my name is Douglas K. DeBeck, I am a partner at Lee & Sharpe.

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