Published: April 10, 2020
Last Updated: February 8, 2021
CRA recognizes four tests for the determination of the nature of the work relationship
Businesses often want to retain independent contractors instead of hiring employees to avoid payroll taxes. The Canada Revenue Agency (Canadian income tax department) recognizes four tests for the determination of the nature of the work relationship between a business entity and the worker who provides services to it, as established by case law. They are: “control” test, “ownership of tools” test, “chance of profit or risk of loss” test, and the “integration” test. The risk of taking the position that a person is not an employee is that the business will be reassessed and will have to pay amounts that should have been withheld, as well as penalties and interest.
Disclaimer:
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."
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