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The Tax Court dismissed Mr. Shameti’s GST/HST appeal, finding he was a builder of the New Home, had to self-assess on first occupancy, and could not use the residence exception.
On balance of probabilities the Court found the appellants occupied the Property as a residence at or shortly after the end of 2012; that factual finding meant the April 25, 2014 sale was an exempt supply under Part I of Schedule V (either via s.3 or para.4(b) if they were builders, or s.2 if not); accordingly the appeals were allowed and the matter referred to the Minister for reassessment without GST/HST payable on the April 25, 2014 supply; the Court declined to decide whether the appellants were builders and reserved that issue for potential future litigation.
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The court found that, on the evidence, neither property met the statutory notion of "substantial renovation"—the Minister's calculations overstated renovated areas (Craven Road was not gutted and Fourth Street included two unrecognized intact basement rooms and a borderline 90.6% computation)—therefore the reassessments were incorrect and must be referred back for reconsideration.
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Applying the Happy Valley factors and Wall, the court found on the balance of probabilities that the appellants did not build Balliol as an adventure in the nature of trade or in the course of a business; three factors (frequency of similar transactions, circumstances responsible for sale, and motive) strongly favoured the appellants, therefore they were not 'builders' for GST/HST purposes and the assessments and penalties were vacated.
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On the evidence before the Court (documents and unchallenged Ministerial assumptions) the appellant retained the subsisting right of ownership and delivered possession of the unit for residential leasing on February 1, 2015; therefore he was a builder deemed to have made a self-supply under s.191(10) of the ETA, liable to remit HST based on the property's fair market value on that date (adopted as $424,000); the appellant failed to rebut the Minister's assumptions and the appeal is dismissed.
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The Appellant was properly characterized as a builder because he constructed homes with a secondary intention consistent with an adventure in the nature of trade, but subsection 191(5) applies nonetheless because he actually occupied the Subject Property as his residence after substantial completion, did not use it primarily for any other purpose during that time, and did not claim input tax credits; therefore the self-supply rule under s.191(1) does not apply and the assessment is vacated.
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The court held that "construction" in the Excise Tax Act includes forming a residential complex by putting the house and the land together; moving a house to a new lot and preparing the foundation, installing services and attaching the house constituted construction such that the seller was a builder required to collect GST.
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