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EHT AUDITS PowerPoint Presentation

EHT AUDITS

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EHT AUDITS

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  1. EHT AUDITS Christopher K. TsoDeloitte & Touche LLP416-643-8915ctso@deloitte.ca Robert B. HayhoeMiller Thomson LLP416-595-8174rhayhoe@millerthomson.ca

  2. EHT Basics • Employer Health Tax Act • Payroll tax on employers • Paying remuneration • To employees at Ontario permanent establishments • Progressive tax rate

  3. Remuneration • “Remuneration” includes all payments, benefits and allowances received or deemed to be received... [and taxable under the Income Tax Act (Canada)] and, without limiting the generality of the foregoing, includes salaries and wages, bonuses, taxable allowances... but does not include a pension... • Taxable allowances paid to senior management are subject to EHT

  4. Payable To Employee • What is an employee? • Traditional “four-in-one test” [Wiebe Door v. the Queen 1987 (FCA)] • Control • Ownership of tools • Chance of profit/risk of loss • Integration

  5. Employment Status Revisited • Wolf v. The Queen 2002 (FCA): • “It follows that the manner in which the parties viewed their agreement must prevail unless they can be shown to have been mistaken as to the true nature of their relationship” • This is not yet Ontario’s position

  6. Audit Issues Verification: • Existence of permanent establishments in Ontario; • Existence of employer-employee relationships; • Accuracy of instalments filed; • Timeliness of returns, and • Accuracy of the calculation of the tax liability.

  7. Books & Records Requested • The Act requires every person to maintain proper books and records in Ontario or at other places as approved by the Minister • Information normally requested: • Address of all permanent establishments; • Organization structure and charts; • Union agreements and/or group benefit plans; • Externally prepared financial statements; • EHT returns and supporting schedules; • T4, T4A, T4PS, T4NR Supplementaries and Summaries; • Payroll Summaries; • Trial Balances, and • Tax Returns.

  8. Audit Period • Normally 4 years plus the current year • Can be extended if non-compliance is attributable to neglect, carelessness, willful default or fraud.

  9. Pre-Audit Review Internal review to ensure: • Compliance with EHT legislation; • Information requested by auditor is appropriate • Sequester privileged documents • Legal advice

  10. Preparation for Audit • Provide all information requested by auditor; • Determine length of stay by auditor; • Provide appropriate facility to accommodate auditor; • Consult with advisors on additional requests by auditor; and • Do not volunteer information.

  11. Completion of Audit • Discussion with taxpayer of any potential tax assessment. • Summary of Audit Adjustments and Statement of Accounts • Summarizes audit findings and proposed adjustments, if any, • Reasons for adjustments, and • Estimated interest and penalties. • Formal Notice of Assessment issued. • Objection to Assessment • Notice of Objection within 180 days from date of Notice of Assessment, • May apply to Director of the Tax Appeals Branch for extension of time • Appeal to Ontario Superior Court

  12. Voluntary Disclosure • No penalties on voluntary disclosure of past non-compliance. • Full payment of tax liability, with interest, is required. • Disclosure must be truly voluntary, i.e., not prompt by the Ministry’s action. • Disclosures will be verified at the Ministry’s discretion.

  13. EHT AUDITS Christopher K. TsoDeloitte & Touche LLP416-643-8915ctso@deloitte.ca Robert B. HayhoeMiller Thomson LLP416-595-8174rhayhoe@millerthomson.ca