Do I need to file a UHT return if I am on legal title to a property but am not the ‘real’ owner?
Short answer? Yes.
Underused Housing Tax (UHT) affects private corporations, trusts, partnerships, non-citizens, residents who are not permanent residents, and non-residents of Canada who own residential properties in Canada. Although most of these affected owners would not have taxes owing, there may be filing requirements.
Many people are unaware that they are considered to be a trustee of a bare trust—and therefore are required to file a UHT return.
What is a bare trust?
A bare trust is considered to exist when a trustee holds legal title to a trust property, but the beneficiaries of the trust hold the beneficial (real) ownership of the property. The beneficiary has complete control over the trustee’s action as it relates to the trust property and the trustee has no independent power, discretion, or responsibility over the property. It is essentially an agent-principal relationship.
Some examples of a bare trust may include:
- If you have helped a child (or anyone) obtain financing by co-signing a mortgage, at which point you were added to the property’s title (allocated ownership in the official land registry system)
- If you have gifted property to a minor child (or children) who is too young to hold a legal title
- If you have added a child (or children) as an owner to your home for probate planning purposes
Note: the creation/consideration of a bare trust does not require a written agreement.
More information on bare trusts can be found on the CRA website.
The CRA considers bare trusts a trust under the Underused Housing Tax Act, so if you are considered a trustee of a bare trust, you are an affected owner, and are therefore required to file an UHT return.
There are significant penalties if it is determined that you are an affected owner and fail to file a UHT return by the deadline. Each trustee and each property require its own separate form. Affected owners who are individuals are subject to a minimum penalty of $5,000 per form.
The annual return filing deadline for calendar year 2022 is April 30, 2023 but the CRA has provided transitional relief until October 31, 2023. Filing before that date will not result in penalties or interest. The filing deadline for the 2023 calendar year and beyond is April 30, notwithstanding many filers of UHT returns are not individual persons.
S+C Partners is here to help you
If you require assistance filing an UHT return or if you have any questions, please call us at 905-821-9215 or email us at firstname.lastname@example.org.
Please also see our Insights: ‘Underused Housing Tax: Key Considerations’ and ‘Do I need to file an Underused Housing Tax (UHT) return if I own a rental property with my spouse?’
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