Advisors face difficult discussions about fees for bare trust filing services

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After the Canada Revenue Agency (CRA) exempted T3 trust tax return filings for bare trusts, financial professionals are navigating difficult discussions about the fees many clients paid for the preparation services.

Depending on the circumstances, an individual client affected by bare trust reporting requirements may have paid anywhere from $250 to four figures for T3 filing services suddenly not deemed necessary for the 2023 taxation year.

Brianne Gardner, financial advisor and co-founder of Velocity Investment Partners at Raymond James Ltd. in Vancouver, says her accounting firm informed her that they would still need to bill clients as it had already completed the returns.

“The CRA change came very late,” she says, noting the majority of bare trust filings were already completed. “Our clients are not happy with the fees.”

Bare trusts include informal trust agreements set up by clients over the years, such as joint accounts between family members and a family member added to the title of their parent or child’s property. Under new requirements for the 2023 taxation year, T3 filings for bare trusts were due on April 2 but abruptly exempted two business days prior.

According to a survey released today of 118 small and medium-sized Canadian accounting firms, the cost for firms and clients related to bare trust filings was estimated at more than $905-million. Joseph Devaney, chartered professional accountant and director of tax education and development at Video Tax News in Edmonton, conducted the survey.

The survey found that accounting firms spent an average of almost $13,000 on education to get up to speed on the new filing requirements. Firms charged almost $11,000 on average for the bare trust returns they filed, and incurred average costs of more than $12,000 for bare trust returns in progress for which they hadn’t yet charged.

David Burnie, certified financial planner (CFP) at Ryan Lamontagne Inc. in Ottawa, says his firm charged clients for filed T3 returns but not for returns still being completed.

“Clients who had work-in-progress returns were relieved that we weren’t billing them, but even more relieved a filing wasn’t necessary,” he says. “The whole issue added complexity to their lives where complexity isn’t needed. Clients are understandably frustrated at the lack of clarity and the manner in which this whole issue has been co-ordinated and communicated by the CRA.”

Mr. Burnie hopes for more information in the April 16 federal budget.

Yet, Aaron Hector, private wealth advisor and CFP at CWB Wealth Management in Calgary, isn’t expecting an announcement anytime soon. He notes that the CRA said it would work with the Department of Finance “over the coming months” to clarify its guidance on the filing requirement.

Mr. Hector didn’t specifically charge clients for preparing and filing the T3 returns, as tax planning services are included as part of his overall wealth management fee. He has some advice for consumers figuring out how to make the most of the fees paid. For example, he advises they get a copy of the unfiled T3 and Schedule 15, and attempt to fill out the forms themselves next year based on the completed 2023 template.

“It really is straightforward data entry and, year over year, should be virtually identical if none of the parties of the bare trusts have changed,” he says. “They may want to save themselves the professional fees next year if it ends up being required.”

Christian Battistelli, CFP with Page & Gomes Financial Partners at Assante Financial Management Ltd. in Markham, Ont., says his firm avoided much of the bare trust hassle when its accounting firm partners decided, in an unconventional move, to not file the T3s for the CRA’s deadline. As the CRA had waived filing penalties this year, the accountants took a calculated risk.

“Thankfully, it worked out in their favour,” he says. “Some waited to see if they are going to walk this back just like they did with the underused housing tax returns.”

That isn’t to say client communications about bare trusts didn’t take place. Originally, the plan was to file well in advance of the April 2 deadline. “But every time we tried, we needed to get more clarification. So, they decided it was best to just hold off on filing them,” he says.

Mr. Battistelli notes that March 31 is already an important deadline for many incorporated businesses that have a Dec. 31 year-end. That fact already makes it a busy time of the year for accountants.

“The thought was to prioritize the filings where there would be interest and penalties if they weren’t filed or paid on time,” he says. “Then, we would push the trust arrangements until after the deadline when we hopefully would have a little more information.”

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