Director Liability for Unremitted GST/HST
The corporate veil does not cover net tax the company collected and did not remit. Work out your personal exposure, whether the two-year limit has closed the door, how strong a due diligence defence looks, and the deadline to object.
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What You Are Exposed To
| Item | Basis | Amount |
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The Two Year Limit
| Test | Your Position | Effect |
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Due Diligence Defence
| Factor | Your Position | Weight |
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Your Options, In Order
| Option | When It Applies |
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Points That Decide This
What to Do Next
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Disclaimer: Section 323 of the Excise Tax Act makes directors jointly and severally liable with the corporation for net tax it failed to remit, together with interest and penalties. Liability arises only where the conditions in subsection 323(2) are met, generally a certificate registered in the Federal Court with execution returned unsatisfied, or a claim proved in a liquidation, dissolution or bankruptcy within six months. Subsection 323(3) provides a defence where the director exercised the degree of care, diligence and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances, assessed on an objective standard. Subsection 323(5) bars an assessment more than two years after the person last ceased to be a director. Equivalent rules apply to payroll source deductions under section 227.1 of the Income Tax Act. The defence score on this page is an indicative aid, not a legal opinion, and every case turns on its own facts and evidence. This page is general information and not tax or legal advice.
It Is Not Divided Between the Directors
The most common misunderstanding is that four directors each face a quarter. They do not. Liability is joint and several, which means the CRA can assess any one director for the entire amount and collect it from whoever has assets.
You have a right of contribution from your co-directors, but that is your lawsuit, not the CRA’s problem. In practice the CRA pursues the director who can pay. A $230,000 corporate debt is $230,000 of personal exposure for each director, not $57,500.
Why HST Is Different From Corporate Tax
Directors are not personally liable for the corporation’s income tax. They are liable for net HST and for payroll source deductions, because both are money the corporation collected or withheld on the government’s behalf and failed to hand over.
| Debt | Director Liability |
|---|---|
| Corporate income tax | None |
| Net GST/HST | Section 323, joint and several |
| Payroll source deductions | Section 227.1, joint and several |
| Interest and penalties on those | Included |
That distinction is why HST arrears deserve attention ahead of almost every other creditor when a business is under pressure. It is the debt that follows you home.
The Two Year Limit Is the Strongest Defence
No assessment can be made more than two years after a person last ceased to be a director. Where the CRA misses that window, the exposure is gone regardless of the merits.
The clock starts when you genuinely cease to be a director, and the resignation has to be real. A written resignation delivered to the corporation, with the corporate records updated. Continuing to sign cheques, direct staff or hold yourself out as running the company can make you a de facto director, and the clock never starts.
Resigning after the failure does not undo liability for what already happened. It starts the limitation period, which is a different and slower benefit.
What Due Diligence Actually Requires
The defence is that you exercised the care, diligence and skill a reasonably prudent person would have exercised to prevent the failure. The standard is objective, so inexperience is not an excuse, and the focus is on prevention rather than cure.
| What Works | What Does Not |
|---|---|
| Systems that segregate and remit the tax | Relying on a bookkeeper without oversight |
| Raising the issue in writing at the time | Saying you were unaware |
| Board minutes recording the concern | A note written after the assessment arrived |
| Pressing for remittance and escalating | Deferring to the other directors |
| Resigning when overruled | Staying on and hoping |
The hardest cases are directors who knew the remittances were behind and let it continue because the business needed the cash. Using the tax as working capital is precisely what the section exists to punish.
The CRA Has to Clear a Gate First
A director assessment is not available at will. Subsection 323(2) requires that a certificate has been registered in the Federal Court and execution returned unsatisfied, or that a claim has been proved in a liquidation, dissolution or bankruptcy within six months.
That procedural requirement is worth checking. Where the CRA has not properly cleared it, the assessment can be challenged on that basis alone without arguing the merits at all.
You Have Ninety Days
A director assessment is objected to the same way as any other, within ninety days of the date on the notice. Missing it means applying for an extension within a further year, which is not automatic.
Objecting on an HST matter does not stop collection, so a payment arrangement usually needs negotiating alongside the objection rather than after it.
What to Do When the Letter Arrives
- Check the dates first. If you ceased to be a director more than two years before the assessment, that ends it.
- Check the procedural gate, meaning whether the certificate and execution requirement has actually been met.
- Gather contemporaneous evidence, since documents created at the time carry weight and reconstructions do not.
- File the objection inside ninety days, even if the analysis is incomplete.
- Deal with collections separately, because the objection will not pause them.
- Do not resign now expecting it to help, since it only starts the clock for the future.
What This Calculator Does Not Cover
- Payroll source deduction liability under section 227.1, which usually runs alongside
- Whether the underlying HST assessment is correct, which may itself be worth disputing
- Contribution claims against co-directors
- Bankruptcy and its effect on the director assessment
- Directors of federal or extra-provincial corporations with different governance records
- Taxpayer relief on the penalties and interest, a separate application
Check the two dates before anything else. The resignation date and the assessment date decide more cases than the merits do. Our audit resolution service covers the review, the objection and the collections position.
Frequently Asked Questions
Common questions on director liability for HST.
Related Calculators and Guides
More tools for directors and corporations in difficulty.
Check the Two Dates Before Anything Else
Send us the assessment and your resignation records. We check the limitation period and the procedural gate first, then build the due diligence position and file the objection inside the ninety days.