CRA offers no relief on stiff penalties for late-filing UHT returns

The Canada Revenue Agency (CRA) is not providing relief to affected homeowners who get hit with penalties or interest for failing to file an underused housing tax (UHT) return and pay any applicable UHT after Oct. 31.

Earlier this year, the tax agency gave affected homeowners a six-month extension beyond the official deadline of April 30, 2023 to file a UHT return and pay any UHT tax for the 2022 calendar year without incurring penalties and interest.

The waiving of penalties and interest on returns and payments received by Oct. 31 was meant to give affected owners “transitional relief” in the first year of the UHT, the CRA said.

However, in a Sept. 22 email in response to questions from Investment Executive, Charles Drouin, a CRA spokesperson confirmed that “UHT returns received on or after Nov. 1, 2023, will be subject to the applicable penalties and interest.”

The penalties for late-filing a UHT are significant: at least $5,000 for individuals, and $10,000 for corporations, for each residential property. If the UHT is payable, penalties may climb higher the later the return is filed, with no cap in the legislation.

The CRA is charging 9% interest on overdue tax.

Drouin said the CRA has discretion, under taxpayer relief provisions, to cancel or waive penalties or interest when taxpayers cannot meet their tax obligations due to circumstances beyond their control. Taxpayers who can’t pay a balance owing because of circumstances beyond their control can ask for relief from interest. Taxpayer relief provisions only apply to penalties and interest, not the tax owing itself.

Effective for 2022, the UHT is an annual 1% tax on the ownership of vacant or underused housing in Canada. The tax generally applies to foreign and non-permanent resident owners of residential property in Canada, but can apply to Canadians who own residential property through a trust, a private corporation or in a partnership.

On Sept. 19, the CRA released an interactive self-assessment tool on its website to help individuals and corporations that own residential property in Canada navigate the UHT.

The UHT self-assessment tool addresses the questions of who must file a UHT return and pay UHT, when to file a return and pay the tax, how to complete the return and calculate the tax, how to file the return and how to pay the tax.

Said Drouin: “The responsibility is on taxpayers to file complete and accurate returns and remit any amounts owing on time.”

On its website, the CRA says it won’t collect or retain information submitted by users of the self-assessment tool. The results obtained by users “are dependent on the accuracy of the information entered” and “not binding on the CRA.”

Rudy Mezzetta

Rudy is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on tax, estate planning, industry news and more since 2005. Reach him at rudy@newcom.ca.