GST/HST on New Home Construction: What Caddell v. The King Means for Owner-Builders
Actually living in a newly constructed home does not necessarily mean GST/HST will not apply when the property is eventually sold.
In Caddell v. The King, 2026 TCC 27, the Tax Court of Canada considered a married couple who constructed and occupied a home before selling it. Despite actually living in the property with their family, the Court found that they were “builders” under the Excise Tax Act and were subject to the GST/HST self-supply rules.
The case demonstrates why the circumstances surrounding the construction, occupancy and sale of a home can be more important than simply whether the owner lived there.
What Happened in Caddell?
Dustin and Breanne Caddell purchased bare land in British Columbia in 2015 and constructed a home on the property. They occupied the completed home but listed it for sale within months and ultimately sold it in 2017.
This was part of a broader pattern.
Over approximately 11 years, the Caddells purchased seven properties and sold five. Several involved purchasing bare land, constructing a home, occupying it and later selling it.
The Canada Revenue Agency (CRA) reassessed both spouses on the basis that they were builders who had made a taxable self-supply of the home.
Were the Caddells Builders?
The definition of “builder” in subsection 123(1) of the Excise Tax Act generally excludes an individual who constructs a home otherwise than in the course of a business or an adventure or concern in the nature of trade.
The Court therefore considered whether the Caddells’ construction of the property was commercial in nature.
The Court examined factors including the length of ownership, the frequency of similar transactions, the work performed on the property, the circumstances surrounding the sale and the Caddells’ motivation.
Although the Caddells maintained that they intended to live in the home, the Court placed significant weight on their overall pattern of conduct.
As the Court stated, “Actions speak louder than words.”
The Court concluded that their primary motivation was profit and that they were builders for GST/HST purposes.
Living in the Home Was Not Enough
The Caddells alternatively argued that the personal-use exception in subsection 191(5) of the Excise Tax Act applied.
The exception can prevent the self-supply rules from applying where certain requirements are satisfied, including that the newly constructed home is used primarily as a place of residence for the individual or certain related persons.
The Caddells had actually lived in the home with their family. Nevertheless, the Court concluded that the property’s primary use was as inventory rather than as a residence.
This is an important distinction. Physically occupying a newly constructed home does not necessarily establish that the property was primarily used as a residence. The surrounding circumstances and the owner’s overall conduct remain relevant.
The GST/HST Self-Supply
Once the Court determined that the Caddells were builders and that the personal-use exception did not apply, subsection 191(1) applied.
Under the self-supply rules, a builder who occupies a newly constructed home can be deemed to have sold and repurchased the property at fair market value. GST/HST can therefore become payable even though no actual sale occurred at that time.
In Caddell, the self-supply occurred when the home was substantially completed and occupied.
Fair Market Value Was Also an Issue
The amount of GST/HST owing depended on the fair market value of the property at the time of the self-supply.
The Caddells argued that the property was worth approximately $775,000. The CRA relied on a professional appraisal valuing it at $915,000.
The Court accepted the CRA’s valuation.
The decision demonstrates that valuation can become a significant issue in a builder assessment. Even where the CRA establishes that the self-supply rules apply, the amount of the assessment may depend on the appropriate fair market value at the relevant time.
What Does Caddell Mean for Homeowners?
Caddell does not mean that everyone who builds, occupies and later sells a home will be considered a builder.
Whether someone is a builder remains a fact-specific determination.
However, the decision demonstrates that moving into a newly constructed home is not enough, by itself, to establish that it was constructed for personal purposes. Repeated construction and sales, relatively short periods of ownership, early attempts to sell and other evidence of a profit-making purpose can point toward builder status.
For taxpayers facing a CRA builder audit, evidence regarding the original purpose for constructing the property and its subsequent use can be critical.
Kirshen Tax Law Can Help
CRA builder audits can involve disputes over whether a taxpayer is a builder, whether the GST/HST self-supply rules apply, whether the personal-use exception is available, and the fair market value of the property.
If you have been assessed for GST/HST in connection with the construction or sale of a home, contact Kirshen Tax Law for a free consultation with a Toronto tax lawyer.
Jeff Kirshen BA, JD (CA), JD (US)
Tax Lawyer | Founder, Kirshen Tax Law
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