Farmers advised of important tax reporting changes

Wednesday, January 17, 2024

Be proactive with your accountants throughout the year; don't wait until year-end to engage.

By Richard Kamchen

Farmers may want to consult their tax advisors for a heads-up about the potential for additional mandatory filings.

For 2023, Underused Housing Tax (UHT) and bare trust reporting promise to have massive impacts that tax experts are still working through while trying to educate their clients about how they may be affected, says Cara Noble, tax manager at Yates Whitaker LLP.

UHT

Many farmers may not have realized that they had to file a UHT return last year in addition to their regular tax filings, says Thomas Blonde, a partner with Baker Tilly GWD. This return may be required even for a farmhouse that they live in.

CRA originally extended the deadline to Oct. 31, 2023, and then extended it again to April 30, 2024.

"So, if a farmer has not filed this, they should make sure that it is filed to avoid possible large penalties – generally $10,000 per house," Blonde says.

Ottawa, however, proposed changes to the UHT in November's 2023 Fall Economic Statement.

The federal government "proposes various Canadian-owned entities to no longer be required to report on the UHT for years 2023 and onward," says Kingston Ross Pasnak LLP tax partner Allan Sawiak.

"The government is also proposing to reduce these minimum penalties to $1,000 for individuals and $2,000 for corporations, per failure."

Bare trusts

Sawiak also says that bare trusts are an issue that will surprise many farmers.

Previously, bare trusts were exempt from T3 filings, but for 2023, reporting is due 90 days after Dec. 31, 2023, he says.

Sawiak explains the changes can affect producers in several common scenarios:

• Those whose land is owned personally but whose farm buildings are recorded in the farm partnership or the farm corporation;
• Offspring who are on the farmland title but their parents have a home on that land, or vice versa, such as if the child needed the parents to guarantee their mortgage and the parents were added to the farmland title;
• Elderly parents having added their adult children to their bank account as part of their estate planning.

Yates Whitaker's Noble reckons that the key scenario will be the one in which an individual is on the land title, but the farm buildings are in the partnership or corporation.

"The buildings will likely be considered held 'in trust' by the individual for the partnership or corporation, thus creating a filing requirement," she says.

Be proactive

Baker Tilly's Blonde encourages farmers to be proactive with their accountants throughout the year rather than waiting until their year-end to engage.

"Often tax planning opportunities are lost when you wait until after your year-end," Blonde says.

He suggests producers ensure their records are well organized and that they submit their information to their accountants as early as possible after their year-end.

"Also, let your accountant know of any major current and upcoming projects on your farm," Blonde advises. BF