Director Liability Eliminated
Building Contractor Eliminates His CRA Debt
Carlo (not his real name) came to see us several months ago. Carlo owned two contracting businesses that provided masonry and bricklaying services to home builders. Over time, the businesses grew, and more employees were added. After some success, however, conditions in the masonry industry began to change. Carlo’s businesses began to suffer from a combination of high labour costs and slower than normal payments from his customers, the home builders.
Cash flow quickly tightened. Watching his bank balances diminish, Carlo was left to make tough decisions that he never previously had to make. Should he pay his employees and his suppliers, or should he pay the CRA for the employee deductions and HST that had begun to accumulate? He really had no choice. If he didn’t pay his employees, they would quit. If he didn’t pay his suppliers, they would stop supplying. The CRA, therefore, would have to wait.
Over time, as the businesses continued to suffer financially, the employee deductions and HST debt increased substantially. The CRA piled on penalties and interest and, in every successive month, more employee deductions and HST debt.
Then one day Carlo’s life was turned upside down. Carlo suffered a serious medical setback that left him hospitalized. Carlo was unable to operate the businesses for nearly one year.
We met Carlo just after he had fully recovered from his illness. Carlo had given up on his businesses, and had recently started a new job with another bricklaying business. To prepare for our meeting, we asked Carlo to dig up the most recent statements of account that he had received for all of his debts.
Of all of his account statements, four statements jumped out at us. Two from the CRA for employee deductions for each business, and another two from the CRA for HST for the two businesses. The employee deductions and HST debt had grown to nearly $175,000 and the CRA was coming after Carlo personally for the money. Carlo knew nothing about it.
Without knowing it, the CRA had billed him personally for the employee deductions and HST owed by the businesses. How was the CRA able to come after him personally for money owed by his companies?
The answer, very simply, is something called director liability. When a corporation owes HST or employee deductions to the CRA, the government can look to the directors of that corporation for payment. Rules govern how the CRA can pursue directors, but, suffice it to say, Carlo was in some trouble. What’s more, Carlo owned a home with his wife which had quite a bit of equity. If Carlo didn’t pay the money, the CRA could lien his home, which would result in the CRA getting paid before anybody else once the home is sold.
We discussed Carlo’s situation, reviewed his finances and looked his budget. Carlo was a very good candidate for our services – he could eliminate the entire debt to the CRA. We worked out a payment plan over 60 months that was affordable to Carlo, taking into account his living expenses, familial commitments and other spending. He made an offer to his creditors, 98% of whom were the CRA.
The offer to his creditors, only a percentage of the total amount owing, was accepted without question. Carlo had emerged: completely healthy, completely stress-free and on the road to being completely debt free.
Carlo’s case was a very ordinary case for us, with a completely extraordinary outcome for Carlo. With our help, Carlo was able to completely eliminate his CRA debt. We do the same thing every day for business owners and others across the GTA who are struggling with their debt.
If the CRA has billed you for your corporation’s liabilities or for any other tax matter, call us today at 416-800-8756. As we did for Carlo, let us help you devise a plan to completely eliminate your debt.