Manses are subject to UHT (Under Utilized Housing Tax) reporting
The United Church of Canada has submitted a formal appeal to the CRA on this topic and has been denied. A broadcast email will go out in early February to Treasurers and ChurchHub primary contacts. Treasurer webinars will include a bit of a “how to” complete the form. In the meantime, here are some FAQ’s …
What is the Underused Housing Tax?
The Underused Housing Tax (UHT) is a new 1% annual tax levied on the value of residential property owned by non-Canadians and some companies/trusts that is vacant or considered underused. The intention of this tax is to deter non-residents and some companies/trusts from passively investing in Canadian real estate and to make housing more available to Canadian residents. Because of the unique United Church Trust Model Deed and resulting trust structure for holding real property, our legal advice is that church manses are inadvertently caught up in this based on legal technicalities. Church trustees who hold title to a manse should file out of an abundance of caution. Each trustee impacted needs to file separately including their personal social insurance number.
Is this absolutely necessary?
The General Council Office working with Pacific Mountain Regional Council sought legal advice on this matter and submitted an appeal to the CRA. The appeal was declined. As goofy as this requirement is, filing is recommended to avoid potential liability for a $5,000 fine per year. Even though virtually no manse will have a tax liability. Unless something changes, filers should complete a separate form for both the 2022 and 2023 years. Note: any incorporated ministries that own a house will typically be exempt because charity direct ownership is exempt. The argument that our congregations are charities holding title was dismissed.
Who needs to file?
All non-Canadian property owners and some companies/trusts are required to file a UHT form (UHT- 2900) with the Canada Revenue Agency (CRA) by April 30 annually. The tax itself will likely not apply to most -if any manses – if they are occupied(exemptions 510 or 520), however all non-Canadian property owners and some companies/trusts are required to file even if they will be exempt from paying the tax. If a church manse title is held in the name of “the Trustees of XYZ United Church” which is considered best practice, filing is technically required. Even worse, each and every trustee should file. Note: if title is held in the name of “The United Church of Canada” or in the name of the local church with no mention of trustees, then no filing is required because direct charity ownership is exempt. We are not making this up!
Tips for filing
To file a UHT tax form, you must have a valid CRA tax identifier number. Individual trustees should file a form and use their SIN as an identifier. If any properties do not have a Canadian postal code, when filing the UHT form this should be left blank. Do not use the postal code of your local post office as this may negate your exemption. Others have spoken to the Canadian Revenue Agency (CRA) and they see no issue with not having a postal code to input on the form (only road access properties will have a postal code). Not having a postal code means that you will also be unable to access the: “Underused housing tax vacation property designation tool”, but it is not necessary to do so if you are exempt as above, and the tool is not helpful, in any event.
Filing Extension for 2022 and 2023
The minimum penalty for late filing is $5,000 per property for any individual owner. Although April 30, 2023 was the deadline to file your UHT form, the CRA has effectively extended the filing deadline for the Underused Housing Tax (UHT) to April 30, 2024, this year only, in an effort to provide more time for affected owners to comply. The CRA’s application of penalties and interest will be waived provided the returns for tax years 2022 and 2023 are filed by April 30, 2024.
Ottawa is Considering Exempting Canadians From Filing UHT for the 2024 Tax Year
In the latest twist, Ottawa is proposing to largely scrap filing requirements that would also affect many Canadian and permanent resident homeowners and some Canadian corporations. Unless something changes in the coming weeks, the most prudent thing to do would be to file a separate form for each of 2022 and 2023.
This article is intended for general information purposes only. While we have attempted to provide information that is helpful for our readers, We do not provide tax, legal or accounting advice and accept no legal liability for the contents of this article. Ensure you check original sources for additional details and updates. For advice regarding your personal taxation and filing needs, please contact your own tax professional or accounting advisor.