Director’s Liability for Unpaid GST/HST and Payroll Deductions

Many people believe that incorporating protects them from personal liability, but when it comes to unpaid GST/HST and payroll source deductions, directors can be held personally responsible. A Toronto tax lawyer can help you assess your exposure and respond strategically to any CRA enforcement action.

Under the Income Tax Act and Excise Tax Act, the Canada Revenue Agency (CRA) can issue a director’s liability assessment if a corporation fails to remit these amounts.

CRA’s Obligations Before Assessing Directors

Before the CRA can assess a director personally, it must first take reasonable steps to collect from the corporation itself. If these steps are skipped, the assessment may be invalid.

We review the CRA’s actions to determine whether they followed proper procedure. Often this is the strongest defence available especially when raised early by a lawyer familiar with CRA director assessments.

Defending a Director’s Liability Assessment

There are three main legal defences against a director’s liability assessment:

• The CRA did not take the proper collection steps against the corporation.
• The 2-year resignation rule — if the director resigned more than 2 years before the assessment was issued, they may be protected.

• The due diligence defence — showing that the director acted responsibly and did everything a reasonable person would have done to prevent the non-payment.

The due diligence defence is complex and has been the subject of many Tax Court decisions. Success depends on a close review of the facts, records, and the director’s actual involvement in financial matters.

Why Work with Kirshen Tax Law?

If you’ve received a director’s liability assessment or if the CRA has threatened to issue one, we can help. As Toronto tax lawyers, we understand the CRA’s internal policies and how to challenge assessments at the audit, notice of objection, and Tax Court stages. We:

• Review the CRA’s collection efforts for legal flaws.
• Assess whether the resignation or due diligence defences apply.
• Prepare legal submissions and communicate with CRA officers.

• Represent you in objections or appeals if needed.

Director’s liability is a serious matter that requires experienced legal guidance. We’ll work with you to protect your interests and build the strongest possible defence.

Proven Results: Director’s Liability

We’ve successfully defended directors against CRA assessments for unpaid GST/HST and source deductions. In multiple cases, we’ve had assessments withdrawn or significantly reduced by showing that CRA failed to follow the proper steps or by proving the director met the due diligence standard.

See examples of successful director’s liability results here.

Book a Free Consultation

If the CRA is pursuing you for a corporate tax debt or director’s liability assessment, contact us today for a free consultation with a Toronto tax lawyer. We’ll evaluate your case and defend you against personal liability for unpaid GST/HST or source deductions.