Deadline to file a return for Underused Housing Tax around the corner

The Underused Housing Tax is meant to curtail foreign ownership of housing through trusts in Canada’s large cities. However, in some circumstances, farmers are being hit with the need to file a return for the Underused Housing Tax.

Although in most cases they are exempt from paying the tax, which is 1 per cent of the house value, there’s a stiff penalty for not filing the return.

The deadline to file a 2022 return for the Underused Housing Tax was extended to October 31. Farm corporations that have employees housed on land owned by the corporation are among those affected.

“For our practice here, we have bee apiaries that bring in temporary foreign workers and they need to house these employees in employee residences. Now, in those circumstances, there’s no vacant days really so they aren’t hit with the tax that’s one per cent that needs to be paid, but if they don’t file this return, there’s a $10,000 filing penalty.” said Allyn Tastad, a partner in the Saskatoon accounting firm Hounjet Tastad Harpham.

In Tastad’s opinion, mobile homes are exempt from needing to file.

“You might have a mobile home on a farm quarter for an employee that works for you. Now, mobile homes if they’re mobile, I was at a session yesterday where they said there has to be tires on this thing. I don’t go that far. Mobile homes are exempt, so we don’t have to file for mobile homes or trailers.”

Tastad says a house owned personally on a quarter of land owned by the farming corporation is another situation which may require the return. However, no returns are needed for houses on personally owned land.

The accounting firm also sees situations where an individual keeps their name on the title of a house owned by a child or grandchild. That also triggers the need to file an Underused Housing Return. The penalty for an individual not filing is $5,000.

Tastad says his accounting firm has been charging $500 to file a return, but he has heard of other firms charging two or three times that amount. Someone that is going to miss the October 31 deadline is advised to talk with their tax advisor and possibly file a voluntary disclosure to Revenue Canada explaining their situation.

Accounting firms have tried to reach out to their clients to avoid penalties, but some people may still be unaware and there’s still a lot of confusion over details of the tax.

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