On Sept. 28, 2023, the Canada Revenue Agency (CRA) released an update to its Underused Housing Tax Notice (UHTN15) – Question and Answers about the Underused Housing Tax (UHT). The new questions and answers address issues related to partnerships, common estate planning, financing scenarios and more.
Partnerships
Determining whether a partnership arrangement exists is critical for UHT purposes since partners of partnerships have a UHT filing requirement, while co‑owners or joint ventures may be excluded from UHT filing requirements. Whether a partnership exists is a question of fact and law. This is discussed in the CRA’s Income Tax Folio S4‑F16‑C1, What is a Partnership?
In order to have a partnership, two or more persons must be carrying on business in common with a view to profit. If any one of these conditions are not met, a partnership does not exist. Failure by a partner of a partnership to meet their Oct. 31, 2023 UHT filing requirement can result in a minimum penalty of $5,000.
Estate planning and financing
It is common for a parent to add a child to legal title of their home for estate planning purposes. It is also common for a parent to be added to legal title of a child’s home to assist the child with financing the purchase.
The CRA has confirmed that both scenarios may represent a trust relationship between the person added to title and the person continuing to use and benefit from the property. A trust relationship creates UHT filing requirements and new trust reporting requirements.
Failure by a trustee of a trust to meet the Oct. 31, 2023 UHT filing requirement can result in a minimum penalty of $5,000. If you suspect that you may have a UHT filing requirement, please contact your Baker Tilly advisor.
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