EHT AUDITS
Christopher K. Tso
Deloitte & Touche LLP
416-643-8915
ctso@deloitte.ca
Robert B. Hayhoe
Miller Thomson LLP
416-595-8174
rhayhoe@millerthomson.ca
EHT Basics
• Employer Health Tax Act
• Payroll tax on employers
– Paying remuneration
– To employees at Ontario
permanent establishments
• Progressive tax rate
Remuneration
• “Remuneration” includes all payments, benefits and
allowances received or deemed to be received... [and
taxable under the Income Tax Act (Canada)] and,
without limiting the generality of the foregoing,
includes salaries and wages, bonuses, taxable
allowances... but does not include a pension...
• Taxable allowances paid to senior management are
subject to EHT
Payable To Employee
• What is an employee?
• Traditional “four-in-one test” [Wiebe Door v.
the Queen 1987 (FCA)]
– Control
– Ownership of tools
– Chance of profit/risk of loss
– Integration
Employment Status Revisited
•
Wolf v. The Queen 2002 (FCA):
“It follows that the manner in which the parties
viewed their agreement must prevail unless they can
be shown to have been mistaken as to the true nature
of their relationship”
•
This is not yet Ontario’s position
Audit Issues
Verification:
 Existence of permanent establishments in Ontario;
 Existence of employer-employee relationships;
 Accuracy of instalments filed;
 Timeliness of returns, and
 Accuracy of the calculation of the tax liability.
Books & Records Requested
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The Act requires every person to maintain proper books and
records in Ontario or at other places as approved by the Minister
Information normally requested:
 Address of all permanent establishments;
 Organization structure and charts;
 Union agreements and/or group benefit plans;
 Externally prepared financial statements;
 EHT returns and supporting schedules;
 T4, T4A, T4PS, T4NR Supplementaries and Summaries;
 Payroll Summaries;
 Trial Balances, and
 Tax Returns.
Audit Period
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Normally 4 years plus the current year
Can be extended if non-compliance is attributable to neglect,
carelessness, willful default or fraud.
Pre-Audit Review
Internal review to ensure:
 Compliance with EHT legislation;
 Information requested by auditor is appropriate
 Sequester privileged documents
 Legal advice
Preparation for Audit
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Provide all information requested by auditor;
Determine length of stay by auditor;
Provide appropriate facility to accommodate auditor;
Consult with advisors on additional requests by auditor; and
Do not volunteer information.
Completion of Audit
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Discussion with taxpayer of any potential tax assessment.
Summary of Audit Adjustments and Statement of Accounts
 Summarizes audit findings and proposed adjustments, if any,
 Reasons for adjustments, and
 Estimated interest and penalties.
Formal Notice of Assessment issued.
Objection to Assessment
 Notice of Objection within 180 days from date of Notice of
Assessment,
 May apply to Director of the Tax Appeals Branch for extension of
time
Appeal to Ontario Superior Court
Voluntary Disclosure
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No penalties on voluntary disclosure of past non-compliance.
Full payment of tax liability, with interest, is required.
Disclosure must be truly voluntary, i.e., not prompt by the
Ministry’s action.
Disclosures will be verified at the Ministry’s discretion.
EHT AUDITS
Christopher K. Tso
Deloitte & Touche LLP
416-643-8915
ctso@deloitte.ca
Robert B. Hayhoe
Miller Thomson LLP
416-595-8174
rhayhoe@millerthomson.ca