CRA Director Liability Assessments: When the CRA Makes Corporate Tax Debts Your Personal Responsibility — Payroll, GST/QST, Penalties, and Enforcement (Montreal CPA Firm Guide)

A Director Liability Assessment (DLA) is one of the most serious actions the Canada Revenue Agency can take against business owners.
When a corporation fails to remit payroll deductions, GST/QST, or corporate taxes, CRA may pursue the directors personally—meaning CRA can seize your personal bank account, garnish your wages, intercept refunds, and place liens on your home even if the debt belongs to the corporation.

Director liability is especially aggressive with:
• payroll source deductions (CPP, EI, income tax)
• GST/HST/QST trust amounts
• repeated late filings
• dissolved corporations
• businesses with poor records
• cash-flow misuse of trust funds

This guide explains when CRA uses Director Liability, why it happens, and how Mackisen defends directors from personal reassessment and enforcement.

Legal and Regulatory Framework

Director liability is governed by:
• Section 227.1 of the Income Tax Act
• Section 323 of the Excise Tax Act
• Quebec Sales Tax Act equivalent provisions
• CPP and EI legislation

Under these laws, directors become personally liable when:
• payroll deductions were withheld but not remitted
• GST/QST trust funds were collected but not remitted
• penalties and interest accumulate
• the corporation fails to pay assessed amounts
• CRA attempts but cannot collect from the corporation

Trust fund debts (payroll and GST/QST) are the most aggressively enforced.

Key Court Decisions

Courts have repeatedly upheld CRA’s right to assess directors personally. Key principles include:
• directors are jointly and severally liable
• CRA does not need to prove intent
• directors must demonstrate due diligence to avoid liability
• due diligence means taking active steps to ensure compliance
• bankruptcy does not eliminate trust fund liability
• director liability extends up to two years after resignation
• CRA must show reasonable collection attempts against the corporation
• penalties and interest are fully transferable

Director liability is one of CRA’s strongest collection mechanisms.

Why CRA Pursues Directors

CRA uses Director Liability Assessments when:
• the corporation is insolvent
• GST/QST or payroll trust funds are unpaid
• the corporation dissolves or ceases operations
• CRA cannot collect from corporate assets
• directors paid other creditors before remitting taxes
• payroll taxes were used to cover operating costs
• GST/QST refunds were claimed incorrectly
• repeated late filings show non-compliance
• corporate books are missing or incomplete

CRA views directors as responsible for ensuring trust fund compliance.

How CRA Issues a Director Liability Assessment (Deep Expansion)

1. Attempted Corporate Collection

CRA first attempts to collect from the corporation by:
• issuing Requirements to Pay
• freezing corporate accounts
• garnishing client payments
• seizing GST/QST refunds
• issuing Federal Court certificates
• placing liens on corporate assets

When CRA fails, they pursue directors.

2. Review of Director History

CRA examines:
• dates of appointment
• resignation dates
• control and involvement
• signing authority
• access to corporate funds
• payroll/ GST oversight

This determines who is liable.

3. Issuance of the DLA

CRA issues a Director Liability Assessment directly to the director for:
• unremitted payroll deductions
• unremitted GST/HST/QST
• penalties and interest
• trust fund amounts

This becomes a personal tax debt.

4. Collection Against the Director

CRA may:
• freeze the director’s personal bank accounts
• garnish wages
• intercept refunds
• seize GST/QST refunds
• issue Federal Court certificates
• lien personal property
• seize rental income
• freeze joint accounts

Director liability is one of the fastest pathways to personal collections.

5. Interaction With Corporate Bankruptcy

Corporate bankruptcy does NOT eliminate trust fund liability for directors.
CRA continues to pursue the director even after the corporation is closed.

Immediate Financial Risks

Director liability exposes individuals to:
• seizure of personal assets
• wage garnishments
• lien on the family home
• frozen bank accounts
• credit destruction
• GST/QST refund seizure
• personal bankruptcy
• additional CRA audits (personal and corporate)

Director liability can ruin personal finances if not handled professionally.

Mackisen Strategy

Defending a DLA requires legal, accounting, and compliance reconstruction. Mackisen uses a multi-step strategy.

Step 1 — Confirm Whether CRA Followed Proper Procedure

We examine:
• date of appointment
• date of resignation
• two-year limitation period
• CRA’s collection attempts
• statutory requirements

If CRA failed any step, the DLA may be invalid.

Step 2 — Build a Due Diligence Defence

We demonstrate that the director:
• took active steps to ensure compliance
• relied on a competent accountant/bookkeeper
• corrected issues promptly
• was misled by internal staff
• had no control over corporate funds
• was not involved in day-to-day operations
• did not authorize missed remittances

Due diligence is the strongest defence.

Step 3 — Reconstruct Corporate Compliance

We rebuild:
• payroll records
• GST/QST accounts
• corporate financials
• trust fund calculations
• payment timelines

This helps reduce the assessed amount.

Step 4 — File a Formal Notice of Objection

We prepare a detailed objection with:
• legal arguments
• procedural errors
• due diligence evidence
• reconstructed schedules
• corrected trust fund amounts

Most improperly assessed DLAs are reversed or reduced.

Step 5 — Stop Personal Collections

We negotiate to:
• lift freezes
• pause garnishments
• stop refund seizures
• create payment plans
• prevent new enforcement

This protects the director personally.

Step 6 — Long-Term Compliance

We help directors set up:
• proper oversight systems
• internal controls
• payroll remittance schedules
• GST/QST compliance
• CRA communication channels

This prevents future exposure.

Real Client Experience

A Montreal restaurant owner shut down operations after struggling through cash flow issues. CRA assessed $38,000 of payroll trust debt against her personally. Mackisen proved she exercised due diligence by hiring a payroll provider and following up repeatedly. CRA cancelled the DLA entirely.

Another client, a construction company director, faced $112,000 in GST/QST trust debt. Mackisen reconstructed records and proved he was not involved in daily operations. CRA removed 70 percent of the assessment.

Common Questions

• Can CRA take my personal money for corporate debt? Yes.
• Can CRA lien my house? Yes.
• Can CRA freeze my personal bank account? Yes.
• What debts can be transferred? Payroll and GST/QST trust amounts.
• Can DLAs be overturned? Yes, with due diligence defence.
• Does corporate bankruptcy protect me? No.
• Are former directors liable? Yes, for up to two years after resignation.
• Can CRA reassess multiple directors? Yes.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.