When Does Director's Liability Arise To Support Section 160 Assessment?

The Queen v. Colitto

The Queen v Colitto¹ addressed the combined effect of two provisions that create third party liability for someone's tax debts, namely:

1. subsection 160(1)² (joint and several liability in connection with a non-arm's length property transfer from the tax debtor for less than fair market value ("FMV"); and
2. subsection 227.1(1) (director liability for corporate failure to deduct, withhold, remit or pay certain amounts).

Colitto is the first case decided by the Federal Court of Appeal ("FCA") to consider the timing for director liability arising under subsection 227.1(1) for purposes of subpara. 160(1)(e)(ii).³ Paragraph 160(1)(e) is a key part of section 160 that sets out limiting factors that would reduce or eliminate liability: liability is limited to the lesser of: