Could YOU be personally on the hook for $704,000 of your corporation’s tax debt?

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Could you be personally liable for your corporation’s tax debt?

Most business owners assume the answer is no. The corporation is a separate legal entity; its debts are its own. That is true for many obligations. But when it comes to GST/HST, the rules work very differently, and a recent Tax Court of Canada decision shows just how expensive that misunderstanding can be.

In Stevens v. His Majesty the King (2026 TCC 76), an Ontario director was held personally responsible for over $704,000 in GST/HST that his corporation collected from customers but never sent to CRA. He raised two defences that sound perfectly reasonable on the surface, and the Court rejected both.

I am Amandeep Singh, a CPA and the founder of Cloudiverse CPAs in Burnaby, British Columbia. On our blog and YouTube channel, I walk through real CRA disputes and Tax Court decisions so business owners can see how these situations develop, long before they become six-figure personal problems. Here is what happened in this one, and what the broader 2026 case law now tells every Canadian director.

The Case at a Glance

The corporation at the centre of the case was Wisebuy Home Inc., an Ontario company that sold refurbished consumer products and appliances. At its peak, the business generated over $8 million a year in revenue. Craig Stevens became the sole shareholder and sole director on March 22, 2011.

Over the following years the business declined, and in October 2016 it shut down entirely.

Between January 2012 and October 2016, the corporation collected GST/HST from its customers on every sale; but according to the Court, that money was kept rather than remitted to CRA. By the time the matter reached the director liability stage, the accumulated debt, including interest, had grown to approximately $704,243.

The company was gone. Its assets were gone. So CRA turned to the director personally.

How Director Liability Works: Section 323 of the Excise Tax Act

Under subsection 323(1) of the Excise Tax Act, when a corporation fails to remit net tax, the directors at the time of the failure become jointly and severally liable with the corporation for the unremitted amount, including all related interest and penalties. In plain language: GST/HST is trust money collected on behalf of the Crown, and when it goes missing, the law reaches past the corporation to the people who were steering it.

But CRA cannot skip straight to the director. Subsection 323(2) sets out mandatory preconditions, and in Stevens each step was satisfied on the record:

  1. Registration. A certificate for the corporation’s debt must be registered in the Federal Court. CRA registered its certificate on February 14, 2018.
  2. Execution. A writ of execution must be issued against the corporation and returned unsatisfied. The writ of seizure came back unsatisfied on August 30, 2018; there was nothing left to collect.
  3. Timing. The director must then be assessed within the limitation period set by subsection 323(5).

With those boxes checked, CRA assessed Mr. Stevens personally on September 25, 2018, initially for over $1.4 million. After he objected, CRA reassessed in January 2020 and reduced the amount to approximately $704,243, accepting that his liability only covered the period starting from the date he actually became director. That date matters: the period someone actually held the director role shapes exactly what they can be held responsible for.

Mr. Stevens raised two defences. Both are worth understanding, because they come up constantly in director liability disputes.

Defence 1: “I Resigned” and the Two-Year Clock Under Subsection 323(5)

Subsection 323(5) stipulates that CRA cannot assess a director more than two years after that person last ceased to be a director. Mr. Stevens testified that he resigned on June 15, 2015; if accepted, that would have made the September 2018 assessment statute-barred.

So the central question became: did he actually step down in June 2015?

Because Wisebuy was an Ontario corporation, the Court applied Ontario’s Business Corporations Act, under which a resignation becomes effective when the corporation receives the written resignation. And critically, the Court emphasized that a resignation must be capable of objective verification. Oral testimony alone, years after the fact, is not enough.

Mr. Stevens testified that he hand-delivered a signed resignation letter to a person involved in the company’s finances, explaining that a consulting opportunity in Saudi Arabia was drawing him away. The Court examined the evidence and found very little objective support for that account:

  • No acknowledgement of receipt from the corporation
  • No minute book entry documenting a resignation
  • No government filing reflecting a director change at the relevant time
  • The individual he said received the letter was never called to testify

The timing was equally damaging. CRA sent him a personal warning letter about potential director liability in May 2016, with no immediate reference to an existing resignation. A second warning arrived in February 2018. The resignation argument emerged only gradually: written representations focused on it in September 2019, and the resignation letter itself was produced only in November 2019.

The Court found that the delay in producing a document that would have resolved the entire matter, if it existed and had been delivered in 2015, was difficult to reconcile with the account being true. A corporate profile update completed in 2019 carried little weight because it was prepared well after the dispute began. The two-year limitation protection was unavailable.

The Lesson: A resignation letter alone is not enough. To pass the objective verification standard, a director resignation needs a complete, contemporaneous paper trail: a signed letter, an acknowledgement of receipt from the corporation, a minute book entry, a director register update, and a government filing that lines up with the resignation date. Without those, your resignation may not legally exist in the eyes of the Court, and the two-year clock never starts.

Defence 2: Due Diligence Under Subsection 323(3); Prevention, Not Delegation

Subsection 323(3) protects a director who exercised the degree of care, diligence, and skill to prevent the corporation’s failure that a reasonably prudent person would have exercised in comparable circumstances. The key word is “prevent,” and the Court spent significant attention on it.

Mr. Stevens argued that he relied on another individual within the company to handle financial oversight and tax filings. The Court found that passive reliance falls well short of the preventative standard:

  • The corporation had no formal system to ensure GST/HST remittances were going out
  • There was no dedicated account set aside for remittances
  • Mr. Stevens made no inquiries into whether filings were being completed or remittances sent

The Court also considered the director’s own sophistication. It noted the corporation carried GST/HST compliance problems from before Mr. Stevens acquired it, and found it difficult to accept that someone with an MBA, practical business experience, and legal support during the acquisition would be unaware of serious pre-existing tax issues in the company he was taking over. The standard of care rises with the director’s education and experience.

The due diligence defence fell away. The appeal was dismissed, costs were awarded against Mr. Stevens, and the personal assessment of over $704,000 was upheld in full.

The Lesson: You cannot “set and forget” your tax obligations. Delegation without systems, without a segregated remittance account, and without regular inquiry is not due diligence; it is the exact pattern the Court described as passive reliance. Prevention requires proactive systems, active monitoring, and documented follow-through. And if you have business training or experience, the courts will expect more of you, not less.

Three Takeaways for Every Canadian Director

1. GST/HST is trust money. When your business collects GST/HST from customers, that money belongs to the Crown from the moment it is collected. Using it for corporate cash flow is a high-risk gamble, and the exposure (principal, interest, and penalties) can accumulate quietly for years before landing on the director personally.

2. Documentation is your shield. Minute books, director registers, government filings, acknowledgements of receipt, and invoices supporting your Input Tax Credit claims are not paperwork formalities. In Stevens, the absence of that record is precisely what defeated the resignation defence. If your corporate records are not current, you are exposed.

3. Active oversight is mandatory. The due diligence defence is a real protection, but only for directors who implement systems (including a dedicated GST/HST remittance account), verify that remittances are actually being made, and document their follow-through.

How Cloudiverse CPAs Can Help

Think of us as Google Maps for your corporate tax position: we show you where you are, flag what is coming, and reroute you before a small compliance gap turns into a six-figure personal liability.

At Cloudiverse CPAs in Burnaby, British Columbia, we focus on corporate tax, GST/HST compliance systems, filing compliance, and documentation that actually holds up when CRA comes looking. We work with business owners across Burnaby, Vancouver, Surrey, New Westminster, and the wider Metro Vancouver area, as well as clients throughout Canada.

Contact us today to review your GST/HST compliance and director-protection documentation before CRA ever raises the question.

Prefer video? Watch the full breakdown of this case on our YouTube channel: https://youtu.be/9gpFMw2tq4Q

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Disclaimer

This article is for general information and educational purposes only and does not constitute tax, legal, or professional advice. Every situation is different; please consult a qualified professional before acting on any information discussed here.