Campground owners in ‘state of shock’ after tax ruling denies them small-business deduction

Canadian Federation of Independent Business president Dan Kelly believes that the rule is 'insulting' to small business owners.Campground owners across Canada could face much higher tax bills after a federal tax court recently rejected one Ontario company’s claim that it should be eligible for the small-business tax deduction.

The recent judgment involves the Lost Forest Park campground in Burlington, Ont., which fought a 2015 notice of reassessment that rejected its claim for the SBD in the 2012, 2013 and 2014 tax years. The owners, who declined to be interviewed for this article, appealed the decision but lost. In the decision dated Aug. 29, Justice Guy Smith concluded that the services and amenities offered at the site “were not sufficient to reach the ‘tipping point where the provision of services overcome the provision of property’” and said the length of the occupancy agreements “suggests quite clearly that the principal purpose of the business was to derive rental income.

"Campgrounds require a tremendous amount of work to turn a profit,” she said, citing tasks such as land and park maintenance, septic, waste and water management as well as marketing and advertising for their business."It is illogical for the CRA, federal government and the courts to claim campgrounds are an 'inactive' business.”

Mr. Richards says he has been fighting to revisit the review since and worries that, the rules, if left as is, could force many small private campgrounds to close because of the higher taxes they would have to pay. A spokesperson for the Minister of National Revenue declined to comment on the specific case but said the government supports small business and emphasized that"we have not changed the long-standing rules surrounding the small business deduction. The same provisions still apply."

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