Subsection 256(2) - Rebate for Owner-Built Homes
See Also
Morgan v. The King, 2025 TCC 36 (Informal Procedure)
Whether the taxpayer had timely filed his application for the Ontario component of the new housing rebate pursuant to s. 256.21(1) for the home of him and his spouse turned on when the substantial renovation of that home was substantially completed (which started the running pursuant to s. 46(6) of the New Harmonized Value Added Tax System Regulations of the two year period for filing the application) and on when the application was filed.
CRA considered that the substantial completion date was January 13, 2020, being the date that the local town conducted its final inspection of the property. The taxpayer argued for January 25, 2000 (the date on which the couple moved back into the home), pointing to the resumption of phone and gas services on that date, and the installation of a concrete driveway pad over six months later. In concluding in favour of the Crown’s position, Yuan J noted (at para. 18) that “the nature of the work completed after January 13, 2020 was not critical to occupancy of the Property.”
However, he went on to find that the taxpayer’s application had been filed within two years of this substantial completion date.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Regulations - New Harmonized Value-Added Tax System Regulations, No. 2 - Section 46 - Subsection 46(6) - Paragraph 46(6)(a) | evidence of taxpayer’s accountant accepted as to when she mailed the rebate application | 365 |
| Tax Topics - Excise Tax Act - Section 334 - Subsection 334(1) | application was mailed about a month before it was stamped as received by the CRA mailroom | 259 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(7) - Paragraph 248(7)(a) | CRA presumption that application was mailed no more than 5 business days before stamped as received by CRA mailroom, was rejected | 63 |
Litman v. The King, 2024 TCC 58 (Informal Procedure)
Mr. Litman built a laneway house on top of a detached garage on his property in Ottawa, without severing it, and claimed the new housing rebate. In finding that this qualified under s. 256(2)(a) as the construction of a residential complex which was a single unit residential complex (defined in s. 256(1) to include a multiple unit residential complex containing two units) for use as the primary place of residence of a relation (his mother), St-Hilaire J stated (at para. 25) that:
The laneway house is detached from the main house and it forms a new residential complex where, prior to its construction, there was none. In addition, I see nothing in the definition of residential complex that requires that the laneway house be held under separate title to meet the requirements of that definition.
Regarding the FMV requirement in s. 256(2)(c), St-Hilaire J accepted that Mr. Litman could not obtain an appraisal for the laneway house given that it could not be sold separately, and accepted his estimate of the FMV as being equal to his construction costs of $255,608 plus a portion (which he valued at $100,000) of the property’s land.
St-Hilaire J rejected Mr. Litman’s argument in the alternative that the laneway house qualified as a substantially renovated residential complex: the pre-existing garage alone was not a residential complex; and if the whole property was the pre-existing residential complex for these purposes, then the meaning of “substantially renovate” under the jurisprudence was not satisfied.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Residential Complex | laneway house atop garage was a separate residential complex notwithstanding that it was not held under separate title | 126 |
Administrative Policy
4 July 2013 Interpretation Case No. 144290
The City leases land to the Developer (with a right to sever and remove improvements on the termination of the lease), and the Developer enters into a "Purchase Agreement" with the Purchaser (conditional upon the Lessor's consent to the transfer of the Lease) for a stipulated purchase price, with the Developer covenanting to construct a townhouse in accordance with specifications. After finding that there was no rebate entitlement under s, 254.1, CRA found that the new housing rebate under section 256 for owner-built homes was available.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 191 - Subsection 191(1) | purported supply of new townhouse on ground lease characterized as mere assignment of leasehold interest | 308 |
| Tax Topics - Excise Tax Act - Section 254.1 - Paragraph 254.1(2)(d) | supply of new townhouse on ground lease | 308 |
Paragraph 256(2)(a)
See Also
Lounsbury v. The Queen, 2019 TCC 109 (Informal Procedure)
The taxpayer and her husband built a house, which was near Lake Huron and a 2 ½ hour drive from their Brampton rental apartment and full-time employment, doing a large portion of the work themselves on weekends beginning in 2008, with the intention to retire there. The municipality issued a first occupancy certificate on March 14, 2014, which noted various minor matters requiring completion. From then on, they lived in the house on weekends, and received a final occupancy permit on September 25, 2015. She did not claim the federal and Ontario new housing rebate until May 31, 2017.
Jorré DJ confirmed the denial of the rebate claims on two alternative grounds: first, the application was not submitted within two years of the day of substantial completion, as required by s. 256(3)(a)(iii); and, second, the new house was not constructed for use as the taxpayer’s primary place of residence, as required by s. 256(2)(a).
Respecting the second ground, he stated (at paras 45-47, 48, and 50):
On one hand, stated intention, changing addresses, location where the Appellant and her husband vote, the greater size of the house compared to the apartment are all indicia which favour the new house being the primary place of residence of the Appellant.
On the other hand, the apartment in Brampton is where the Appellant and her husband live during the greater part of the week and is much closer to the workplaces of the Appellant and her husband.
This last consideration regarding time spent in each location is very important and must be given great weight.
… [T]he Appellant and her husband may retire approximately two years after the hearing of this matter. This would be 6 ½ years after substantial completion. ...[T]his is too far in the future.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 256 - Subsection 256(3) - Paragraph 256(3)(a) - Subparagraph 256(3)(a)(iii) | substantial completion had occurred by the time of the interim occupancy certificate | 291 |
Whittall v. The Queen, 2017 TCC 212 (Informal Procedure)
An individual gutted and renovated approximately half of the floor space in his bungalow, and did less substantial renovations to the other half (e.g., merely replacing windows, fixtures and doors, and repairing and painting, but not replacing, the drywall). After reviewing the mildly inconsistent jurisprudence, Bocock J concluded that this did not meet the statutory test of “substantial renovation,” so that the individual was not eligible for the GST/HST new housing rebate.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Substantial Renovation | gutting only half the rooms in a house did not qualify | 411 |
Erickson v. The Queen, docket 1999-5065-GST-I (Informal Procedure)
The owner renovated his home such that its square footage was doubled, and a garage and second floor were added. He conceded that he had not substantially renovated the existing premises. In confirming the Minister’s denial of the GST new housing rebate referred to in s. 256(2) (which was made on the basis that owner did not construct a residential complex as defined in s. 123(1)), Hershfield J. stated (at para. 15):
[A]n addition will not give rise to rebates unless it incorporates (consumes) a pre-existing premises to the point where the addition is essentially the new residential premises and the pre-existing premises, having ceased to exist as a residential unit is essentially reduced to a relatively minor aspect of that new premises. If renovations which are expressly provided for under the Act must be so substantial as to require virtually gutting all of a pre-existing premises to qualify for a rebate, additions, for which there are no express provisions in the Act, should (if they are to be considered at all) presumably be more substantial yet. An addition that doubles square footage by adding a few rooms in any direction will not qualify for a rebate applying these criterion, even if the character of the residence has been modified in the process.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 123 - Subsection 123(1) - Substantial Renovation | a renovation does not qualify as substantial unless virtually all of the existing premises are gutted | 157 |
Subsection 256(3) - Application for Rebate
Cases
Lim v. The Queen, docket 98-1202-IT-G (TCC)
The appellant had demolished the fundamental assumption of the Minister that substantial completion occurred in April 1995 by advancing evidence that he had installed tiles in parts of the house, completed installation of some of the hardwood floor, installed light fixtures, installed moulding on the cabinet and installed shower stalls after that date. As the onus had shifted to the Minister to put forward evidence of another date that was still outside the two-year limit referred to in s. 256(3), and this had not been done, the appeal was allowed. Bowman T.C.J. also stated:
"I have concluded that the construction was not substantially completed until the railing on the stairs and balcony was installed. The appellant could not have obtained a certificate of occupancy before they were completed and they clearly were necessary for the safety of the house."
Bowman T.C.J. also indicated that the application of fixed percentages was not an appropriate method for determining substantial completion.
Paragraph 256(3)(a)
Subparagraph 256(3)(a)(iii)
See Also
Maskell v. The Queen, 2021 TCC 18 (Informal Procedure)
The taxpayer bought an old house and made substantial renovations to it. The Minister denied his GST/HST New Housing Rebate application on the basis that it had not been submitted within the two year time period, after the construction or substantial renovation of a complex is substantially completed, provided by s. 256(3)(a)(iii). The Minister considered that substantial renovation of the particular building was “substantially completed” no later than October 16, 2013, but the taxpayer claimed a December 15, 2015 substantial completion date.
Russell J dismissed the appeal. Virtually all of the invoice dates shown in the Construction Summary Worksheet were dated 2012 or 2013 and there were no witnesses to corroborate the taxpayer’s testimony as to storage of materials or as to when work actually was done (para 7). The Respondent entered photos into evidence showing two Google “street views”, first from August 2012 showing a dilapidated home with construction materials, and a second from July 2014 showing a spruced-up building and a pleasure craft parked in front of a new looking garage. (para 9) A third photo from June 2013 showed a bedroom suite nearly completed (para 10). On the basis of the construction invoices and photos and on the basis of giving the taxpayer the benefit of the doubt by treating “substantially all … as indicating no less than 90%” (para 11), Russell found that the rebate application was submitted more than two years after substantial completion of the renovation project, thus rendering per s. 256(3)(a)(iii) ETA the rebate as not available.
Lounsbury v. The Queen, 2019 TCC 109 (Informal Procedure)
The taxpayer and her husband built a house, which was near Lake Huron and a 2 ½ hour drive from their Brampton rental apartment and full-time employment, doing a large portion of the work themselves on weekends beginning in 2008, with the intention to retire there. The municipality issued a first occupancy certificate on March 14, 2014, which noted various minor matters requiring completion. From then on, they lived in the house on weekends, and received a final occupancy permit on September 25, 2015. She did not claim the federal and Ontario new housing rebate until May 31, 2017.
Jorré DJ confirmed the denial of the rebate claims on two alternative grounds: first, the application was not submitted within two years of the day of substantial completion, as required by s. 256(3)(a)(iii); and, second, the new house was not constructed for use as the taxpayer’s primary place of residence, as required by s. 256(2)(a).
Respecting the first ground, he stated (at paras. 23, 29-30):
While the first occupancy certificate is not in itself determinative, the fact that it permits residential occupancy combined with the relatively minor list of items that are required to be done before issuance of a final certificate are significant factors to be considered.
Considering the situation overall, although there were still some things to be done, compared to what had been done, what had yet to be done was very modest in scope. I would also add that certain items are not necessary for there to be a completed house. Also, the Appellant and her husband were clearly able to live in their house by the end of March 2014.
I find that, prior to May 31, 2015, the new house was substantially complete.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Section 256 - Subsection 256(2) - Paragraph 256(2)(a) | larger weekend country home was not their primary place of residence | 301 |
Paragraph 256(3)(b)
Cases
Lachance v. Canada (National Revenue), 2018 FC 925
The applicant misunderstood the CRA Guide entitled “GST/HST New Housing Rebate” when she reviewed it within the two year deadline for filing for a new housing rebate specified in s. 256(3)(a). Only two months after that deadline did she become aware that, notwithstanding that the fair market value (FMV) of her new home had exceeded $450,000, she nonetheless was entitled to the Ontario new housing rebate, and she thereupon applied for the Ontario rebate and for an extension of the two-year deadline under s. 256(3)(b). CRA denied the extension on the basis that:
- There were no circumstances beyond her control (e.g., natural disasters or serious illness) that prevented her from applying within the two year period;
- No actions of any CRA employee caused the delay;
- The impugned wording in the Guide describing the availability of the Ontario rebate was not inaccurate.
In particular, the final CRA reviewer “concluded that there were no errors in the Guide that could be, in the context of the Applicant’s file, considered an action of the CRA warranting an extension of time to file a rebate application” (para. 23).
Although Manson J stated (at para 25) that he had “sympathy for the Applicant’s position that the language in the Guide could be more clearly articulated so as to avoid any unnecessary confusion on when a Provincial Rebate is available in contrast to the Federal Rebate,” he nonetheless dismissed that application after stating (at para. 22):
Page 10 of the Guide states that a taxpayer is eligible for a Provincial Rebate in two scenarios: if they are eligible to claim some of the federal part of HST as a Federal Rebate, or if they would be eligible to claim a Federal Rebate but for the value of their home exceeding $450,000. The Minister’s conclusion that there were no errors in the above language or that the language does not mislead or misinform, is reasonable.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 220 - Subsection 220(3) | CRA could refuse an extension to a taxpayer confused by a CRA Guide | 179 |
March v. Canada (Attorney General), [2013] GSTC 60, 2013 FC 394
The appellant built a new home and moved in May 2009. The deadline for her housing rebate application was May 2011, and the appellant filed her application in April 2011. The Minister did not receive the application, and dismissed the appellant's application to extend the filing deadline.
Heneghan J upheld the Minister's decision, as it was within the range of acceptable and rational solutions. There was some suggestion of a postal disruption that would have stopped the Minister from getting the rebate application, but the only evidence that the appellant gave on the extension application was a copy of her original rebate application.