Smythe LLP was recently awarded the Financial Services Award by the Greater Nanaimo Chamber of Commerce. This award is given to any banking, financial, investment, or accounting service recognized for expertise leading to consistent customer satisfaction and ability to deliver customized solutions that help their clients achieve their unique goals.
Mike Berris, partner and group lead at Smythe Advisory, was recently featured on Peter Tessier’s The Insurance Podcast, where he joined in to discuss merger and acquisitions within the broker distribution channel. Mike outlined strategies and processes to prepare your business for sale, explained where the money is coming from for merger activities, and predicted what the future might hold for the broker channel as a business.
Click the link below to listen.
A health and welfare trust (HWT) is not defined in the Income Tax Act (the Act). In general terms, a health and welfare trust is described as a trust arrangement established by an employer for the purpose of providing health and welfare benefits to its employees. Under this type of trust arrangement, trustees receive contributions from the employer and in some cases from employees, to provide certain health and welfare benefits agreed to between the employer and the employees. Multiple employers can participate in the same health and welfare trust.
In the past, the Canada Revenue Agency (CRA) has published administrative positions regarding the requirements for HWTs along with detailed guidance on computing taxable income of such trusts. Employer’s contributions to a HWT are tax deductible in the year made if they are reasonable. In preparing trust income tax returns, a HWT may deduct taxable benefits it pays out.
In 2010, the Act was amended to introduce the employee life and health trust (ELHT) rules which are virtually identical to the CRA’s administrative guidance on HWTs. An ELHT, like a HWT, is an arrangement that allows an employer to make contributions to a trust that will provide benefits under a group sickness or accident insurance plan, a private health services plan or group term life insurance. Employer’s contributions to an ELHT are tax deductible. An ELHT may deduct all expenditures related to providing eligible benefits, including insurance premiums, claims and administrative expenses plus any benefits it pays out.
An EHLT has restrictions on what employees can participate. The ELHT’s objects are limited to paying “designated employee benefits” for employees, former employees or members of their families who belong to at least one “class of beneficiaries” of one or more participating employers. At least one class of beneficiaries of an ELHT must contain more than 25% of all employees and at least 75% of the members of that class cannot be key employees. A key employee is defined as an employee who owns 10% or more of the employer’s shares or a “high-income” employee. This rule discourages plans that benefit business owners and key employees only.
The 2018 Federal Budget proposes to discontinue the application of the CRA’s administrative positions with respect to existing HWTs after the end of 2020 in order to encourage conversion of such trusts to ELHTs. Starting in 2021, only ELHTs will be subject to the tax rules for trusts according to the Act. In addition, the CRA will no longer adhere to its administrative positions for HWTs established after February 27, 2018.
The Department of Finance has requested comments on the transitional rules by June 29, 2018. The issues for consideration in the consultation include:
The Department of Finance will release draft legislative proposals and guidance to facilitate the conversion of existing HWTs to ELHTs following the consultation.
Please send your comments by June 29, 2018 to the Department of Finance at:
Smythe LLP is pleased to announce their acquisition of South Surrey-based CPA firm Brewer Edge LLP. The Brewer Edge team, led by Gary Brewer, CPA, CGA and Julie Edge, CPA, CGA, has joined the Smythe Langley office effective January 1, 2018.
Having served the Fraser Valley business community for over 35 years, Brewer Edge LLP is a full-service CPA firm that has been providing accounting and tax services to owner-managed businesses in a variety of industries, specializing in the logging industry.
This merger is a great opportunity for Smythe to expand its accounting, tax and business advisory practices further into the Fraser Valley. With a new team and the addition of a wealth of experience, Smythe remains committed to delivering quality work to its valued clients while ensuring high-level client service and attention.
Making our clients successful is how we measure our success, and with a growing practice, we are excited for the future.
On December 13, 2017, the Department of Finance released revised draft legislative proposals in respect of the tax on split income (“TOSI”) rules, which are proposed to be applicable after 2017. The revisions aim to simplify and clarify the proposed measures originally introduced on July 18, 2017. The Canada Revenue Agency also released guidance on the application of the TOSI rules, which can be found here.
For more information on this proposed policy, contact one of Smythe’s tax advisors here.
Congratulations to the following individuals on their successful completion of the 2017 CFE! After many years of preparation, months of studying and a gruesome 3-day exam, all their hard work has paid off and we’re excited for their future careers as CPA’s.
From top left to bottom right: Shannon Beers, Edwina Cai, Kenneth So, Jane Lumb, Sunny Bains, Michelle Leung, Jeremy Heppenstall, Mitesh Parekh, Galina Nelson, Shane MacArthur, Tim Peters, Ryan Mah, Yasamin Alami, Mitchell Peterson
Left to right: Lesley France, Mike Berris – Partner, Alanna Mann
Smythe LLP is pleased to welcome Randy Munro, CPA, CA to the partnership as Tax Partner to our Langley office, effective November 1, 2017.
Randy has 33 years of experience providing professional tax advice across a variety of industries. He also has extensive experience with owner-managed businesses, including corporate reorganizations, succession and estate planning.
In addition, Randy has a focus working with First Nation businesses on a variety of specialized services, including structuring of limited partnerships, establishment of settlement trusts and advising on the tax components of treaties.
Please join us in welcoming Randy to the Firm. His years of experience and expertise will be a valued asset to Smythe, specifically to its Langley practice. Smythe continues to be dedicated to providing our clients with a range of accounting, tax, insolvency and business advisory services in Vancouver, Langley and Nanaimo.
Randy Munro, CPA, CA
On November 2, the House of Representatives released their tax reform legislation, the Tax Cuts and Jobs Act. The bill is the starting point for negotiations and will likely go through several revisions before it is enacted. The following synopsis highlights some of the significant impacts on individuals and businesses.
While the Tax Cuts and Jobs Act will be revised in the coming days, the bill presents some of the most sweeping changes to US tax law in several decades. The current goal of the House and Senate Republican leaders is to finalize the legislation by the end of 2017. US citizens in Canada, especially the owners of Canadian corporations, as well as businesses with cross-border investments, will likely be affected by these proposals and may wish to review their current tax structure.
For more information on the proposed tax changes, contact one of Smythe’s US tax advisors below.
This week, the Department of Finance issued two news releases, being their initial responses to the vast number of submissions received during the consultation period related to the July 18, 2017 tax proposals. Further information is expected to be forthcoming.
The Government announced its intention to lower the federal small business tax rate from 10.5% to 10% effective January 1, 2018, and to 9% effective January 1, 2019. This tax rate applies to the initial $500,000 of qualifying active business income of a Canadian-controlled private corporation.
The Government announced its intention to move forward with a simplified form of measures proposed to limit income sprinkling using private corporations. As originally announced, the tax on split income rules will introduce a reasonableness test for family members aged 18-24, as well those 25 and older. The intention of these tests will be to demonstrate an adult family member’s contribution to the business through a combination of the following four principles:
The Government promises to simplify the proposed measures in the draft legislation released on July 18, 2017 in order to reduce the compliance burden, better target the proposed rules and address double taxation concerns. How the rules will be simplified is yet to be seen; however, the tax on split income rules will be effective for the 2018 and subsequent taxation years.
The Government will not be moving forward with the proposed measures that prevent the multiplication of the lifetime capital gains exemption (LCGE). The originally proposed rules sought to disallow the LCGE for capital gains that accrue before the year an individual turns 18 years of age and those that accrue during the time the property was held by certain non-qualifying trusts. However, it appears capital gains may still be subject to the tax on split income rules, which may limit the LCGE claim.
The Government has also abandoned the proposed measures relating to the conversion of dividend income into capital gains. The proposed rules would have created increased taxes for intergenerational business transfers, increased taxes on private company shares held upon death, and uncertainty around capital dividend account balances.
The Government announced its intention to move forward with measures to limit the deferral benefits of passive investments in private corporations while:
Currently, it is unclear as to what measures will apply to track income from grandfathered passive investments and those that are subject to the new rules. Further the scope of passive income is yet to be defined, particularly whether certain capital gains may be scoped out.
The Department of Finance intends to release the related draft legislation as part of the 2018 Budget. Any proposals will apply on a going-forward basis.
Significant concerns were raised during the consultation period in response to the July 18, 2017 tax proposals. The Government announced it will address the unintended consequences of these proposals and will make changes to the tax treatment of private corporations with the intention to reflect the following five guiding principles:
For more information on this proposed policy contact one of Smythe’s tax advisors here.
In a recent article written by our Smythe Advisory group titled Selling a Professional Service Practice – Part 1: A Cautionary Tale, the common mistakes when selling a professional service firm are uncovered. While professional service firms come in many forms, this article is focused on those organizations that have commercial goodwill. To read the full article click here.
MISTAKE #1 – Answering the phone without a plan
MISTAKE #2 – Relying on their pricing without understanding the fair market value of your business
MISTAKE #3 – Merging versus selling
MISTAKE #4 – Never setting expectations
MISTAKE #5 – Being unrealistic about your prospects
To learn more about professional service firm divestitures or our Smythe Advisory practice, visit our website here.