Kevin Burkett, Tax Partner at Burkett & Co. Chartered Professional Accountants is also a portfolio manager and advisor. He offers full tax services in addition to his investment and wealth management expertise. He explained exactly what went into the CRA’s initial guidance around bare trusts and the sudden decision to reverse that guidance. He outlined where this decision has left his clients and how advisors, whatever their tax certifications, can do to help clients who have been impacted by this sudden reversal.
“Clients were rightly confused by these rules, and found it odd that they needed to make these filings,” Burkett says. “As an advisor, for the last two months we’ve been doing our best to explain the CRA’s position, to commiserate with clients a little bit…We did the work to prepare those filings and two days before the deadline we hear these trust filings won’t be necessary. It’s quite challenging and I think clients are understandably frustrated.”
In demonstrating how broad the definition of a bare trust is, Burkett notes that if a parent helped their child qualify for a mortgage by co-signing a lease, it may meet the definition of a bare trust. Nevertheless, clients want to stay compliant and advisors like Burkett make it their duty to keep everyone onside. As much as the requirement was itself a bit of a pain, the reversal of the decision has done more damage to the CRA and put advisors like Burkett in a more challenging position.
“I think this has some interesting long-lived implications. We may find it more difficult in the future to make the case for new filings,” Burkett says. “I think some taxpayers may be less inclined to comply, too, expecting that there might be some later about-face.”
The initial decision to require T3 filings across all trusts was, Burkett says, borne of an extensive consultation process that began in 2018. While there might not have been consensus that this was the right decision, advisors and accountants were aware of the plans. Burkett’s key takeaway, however, is that the CRA was prevented from fully implementing the feedback they had received, likely due to some form of political interference. A decision at the 11th hour meant they clearly failed to engage with the stakeholders at a level high enough to prompt the CRA to reverse its decision.
