Principal Issues: Whether the CRA will continue with its practice of not assessing interest and penalties where an inter vivos trust does not make instalment payments as required under section 156.
Position: Not known at this time.
Reasons: In preparation for the introduction of the new trust rules announced in Budget 2014, all associated administrative practices of the CRA are being examined.
STEP CRA Roundtable June 2014
QUESTION 9. Interest and Penalties on Deficient Instalments of Inter Vivos Trusts
In response to question 20 at the 2010 STEP Canada National Conference, the CRA noted that under the current administrative policy, the CRA does not assess installment interest and penalties where an inter vivos trust does not make installment payments required under section 156.
Can CRA confirm this is the current policy?
CRA Response
Under current administrative practices, the CRA does not assess penalties or interest where an inter vivos trust fails to make sufficient instalment payments. In preparation for the introduction of the new trust rules announced in Budget 2014, all associated administrative practices of the CRA are being examined. It is expected that any changes to these practices will be introduced in conjunction with the new rules and communicated in a clear and transparent manner.
Budget 2014 proposed, among other trust related measures, that testamentary trusts (other than estates for their first 36 months) and grandfathered inter vivos trusts will not benefit from the exemption from the tax instalment rules. This proposed measure will apply to the 2016 and subsequent years.
William King
2014-052659