Trick or treat? The UHT deadline is extended (for a second time) on the deadline (Halloween day 2023)

Imagine: you’re a good taxpayer, following the rules, and just paid an accounting firm (like ours) a thousand dollars, or more, to be compliant with the new UHT reporting regime. You open your computer, at 4pm on the UHT deadline (Halloween 2023) to see this headline Government of Canada extends deadline for homeowners to file their Underused Housing Tax return – Canada.ca. The deadline that you paid a lot of money to meet has now been extended, for a second time, to April 30, 2024. You feel like the government has just played a big Halloween trick on you.

When is the UHT filing deadline?

The deadline for Canadian businesses to submit Underused Housing Tax (UHT) is April 30, 2024. 

When was the old UHT deadline?

Previously, the UHT deadline was the April 30, 2023, however the extension for relief from penalties for late filing was extended to October 31, 2023. 

NOW Imagine: The first time you ever heard about the obscure new UHT rules was in the couple days leading up to the (first extended) deadline, say, in the Globe & Mail (The ‘Bank of Mom and Dad’ is no longer just for down payments). You think you have to file but there is no time left. You’re surprised at how quiet the media has been about these changes that have been around for the better part of a year. This same headline is most definitely more of a Halloween treat.

For those paying attention, the second penalty and interest waiver extension (to April 30, 2024) is the same day that 2023 UHT returns are due to be filed, and a full month after the new 2023 trust returns are due. 

Everything you need to know about Underused Housing Tax

What we’ve learned about UHT

During the last few months, we’ve learned a lot about this new tax and who is affected and who is not, while filing many “protective returns” where there is still uncertainty about whether

  1. A husband and wife or other common-law partner arrangement constitutes a partnership, requiring them to file a UHT return for 2022
  2. Whether a bare trustee in a joint venture or even a personal holding on behalf of a beneficial owner and
  3. Almost everything in between.  

Underused Housing Tax – Partnerships are not always what they seem

What if I’m using a residential property as a business or office space, without major renovations?

We have seen situations where a corporation has purchased a new residential condo unit, but then used it exclusively as an office with zero renovations, other than to equip each bedroom and the common area with desks and chairs to accommodate staff vs. renting a traditional office space. CRA’s stated position is that such properties are still considered to be “residential property” and the “affected owner” must still file and return and if possible, claim an exemption from paying the tax. 

On the topic of bare trustee individuals or corporations, the person on title is still required to file a UHT return, even if the beneficial owner was another individual, partnership, corporation or trust.

Handling UHT as a trustee of a trust

However, where a person is the trustee of a trust, they may be able to claim an exemption if they qualify. Where a trust and trustee are involved, there are specific income tax filing requirements to comply with, some of which are overdue for the 2022 UHT return. 

We have seen a situation where a daughter held her mother’s house in trust as an estate planning measure, while her mother collects and reports income on long-term rents from the home. Not only does the daughter have to file a UHT return, but she’s also caught by the new trust reporting rules.

The UHT law is incredibly wide reaching, and the CRA’s extension of the period during which they will waive penalties and interest is a reflection of

  1. How poorly this legislation was written
  2. How little media attention these rules have received, and
  3. How hard this will be for the CRA to administer. 

Hopefully by April 30, 2024 the government will have a chance to rethink this and, at least, makes some changes to the UHT. For all those of you who just paid your accountant to figure this out: I’m really sorry. Trust me when I tell you, this isn’t how we like to make our living.

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