Two weeks ago there was much excitement over a private member’s bill to make it reasonable for small business owners to keep their businesses in the family. I wrote about it on June 28th.
Let’s be clear. This wasn’t an advantage given to businesses. It simply eliminated a big tax cost faced by small businesses, farmers and fishers if they want to sell their businesses to their children instead of selling to an outside party. I wrote about this in my newsletter entitled “Why it is still more expensive to sell to your children”.
After repeated promises to address this issue, the Government failed to do so.
On May 12, the House of Commons passed Bill C-208 with the support of the opposition parties and 19 brave Liberal MPs. The government, including all cabinet members, opposed the bill – so much for supporting the middle class.
This Bill received Royal Assent on June 29th and was supposed to take effect immediately.
This would mean that small businesses could arrange their affairs to sell to their children.
Admittedly, there were some technical issues in the Bill that needed addressing.
But instead of addressing the issues, the Government announced that they would repeal the legislation, retroactive to the date of Royal Assent, and introduce their own legislation. And they will delay the effective date until January 1st, 2022.
Now business planning comes to a screeching halt. Not only will the changes not take effect immediately, but, until we see the legislation, we don’t know what the new rules will be.
In an excellent discussion of this new situation, Allan Lanthier, who is a retired partner of an international accounting firm and has been an adviser to both the Department of Finance and the Canada Revenue Agency, has written an article in the Financial Post, entitled Another Liberal slap-down of Parliament with repeal of family business tax bill. M. Lanthier has also written a follow up piece in Canadian Accountant, entitled Tax relief for family business transfers: A legislative fiasco – Part II.
If there is an election call, as is expected, the current Act will stay in force until Parliament resumes.
If the Conservatives win the election, I would expect them to support the change in the law, and the effective date, and then make the necessary changes.
If the Liberals win, the current Act will be repealed and we will have to wait to see what comes next.
And where is Trudeau’s support for the middle class?
- Chuck