April 2015 Newsletter

The federal income tax credit for investments in a Labour-Sponsored Venture Capital Corporation (LSVCC) is being eliminated, effective for the 2017 year. Generally speaking, LSVCCs are mutual fund corporations that are sponsored by labour unions or organizations and that typically invest in small, start-up businesses. The federal government announced in the March 2013 Budget that the LSVCC program is no longer considered effective and will be phased out.

Under current rules, eligible capital property (ECP) of a business is subject to a tax regime that is similar to the capital cost allowance (CCA) regime that applies to depreciable property. ECP includes certain intangible properties, such as purchased goodwill, customer lists, the cost of obtaining trademarks, and incorporation costs.

If you use a motor vehicle in the course of a business, you can deduct reasonable expenses that relate to the business use of the vehicle. The deductible expenses include those for gas, oil, minor repairs, maintenance, insurance and licenses.

Tax-free car allowances

Employees can receive a tax-free car allowance from their employers if the allowance is both (a) reasonable and (b) based on the kilometres driven in the year in the course of employment. The CRA typically allows a tax-free allowance up to the maximum amount deductible for the employer.

When a corporation undergoes a change in control, there are various income tax restrictions that can apply to the corporation. Most of the restrictions relate to the use of certain tax attributes after the change in control.

The CRA recently announced the new prescribed interest rates that apply to amounts owed to the CRA and to amounts the CRA owes to individuals and corporations. The amounts are subject to change every calendar quarter. The following rates are in effect from April 1, 2015 to June 30, 2015, and remain unchanged from the last several quarters.

Rectification of corporate articles allowed − stock dividend was legally effective

The recent Lau decision is one of several cases that have dealt with the legal remedy of “rectification” and its relevance for income tax purposes. The case involved a complex series of transactions and corporate reorganizations that took place in British Columbia.