A garnishment (or “requirement to pay”) under section 224 of the Income Tax Act can be a real headache for the garnishee. The garnishee is put in the middle of another taxpayer’s troubles with the CRA, and the scope of the requirement is sometimes unclear.
Subsection 224(1) provides as follows:
Where the Minister has knowledge or suspects that a person is, or will be within one year, liable to make a payment to another person who is liable to make a payment under this Act (in this subsection and subsections (1.1) and (3) referred to as the “tax debtor”), the Minister may in writing require the person to pay forthwith, where the moneys are immediately payable, and in any other case as and when the moneys become payable, the moneys otherwise payable to the tax debtor in whole or in part to the Receiver General on account of the tax debtor’s liability under this Act.
So what happens if a tax debtor has advanced an amount to a corporation of which he is a shareholder and, arguably, the amount advanced is payable on demand? 3087-8847 Quebec Inc. v. The Queen, 2007 TCC 302 at ¶42, suggests that the service of a requirement to pay acts as a demand by the tax debtor and, as a result, the corporation is immediately required to pay to the CRA the amount advanced (or the amount subject to the requirement, if it is a lesser amount).
