CRA’s bare trusts rules cost nearly $1 billion, accounting firms find.

TLDR:

• Accounting firms and clients spent almost $1 billion trying to comply with new reporting rules for bare trusts before the CRA decided not to enforce them for the 2023 tax year.
• The new rules imposed onerous tax reporting requirements on Canadians with ordinary family financial arrangements and were scrapped just days before the filing deadline.

Costs for compliance with the Canada Revenue Agency’s controversial new reporting rules for bare trusts neared $1 billion, as per a survey of Canadian accounting firms. The new rules, part of a larger push to improve trust transparency, were widely criticized for being overly burdensome, especially for informal family financial arrangements. The CRA announced a last-minute decision not to enforce the rules for the 2023 tax year, causing frustration and financial losses among taxpayers and accountants. The survey conducted by Joseph Devaney revealed that accounting firms spent an average of $13,000 on training staff and charged clients an average of $11,000 for preparing bare trust files. The total estimated cost of compliance was approximately $905 million, highlighting the impact of implementing complex tax legislation without proper consideration. The move to scrap the rules caused strain with clients and led to additional costs for accounting firms. Overall, the situation underscores the need for careful consideration and evaluation of tax-related policies to prevent unnecessary financial and administrative burden on taxpayers and businesses.