How do I check for CRA debts before buying a business?

The CRA does not keep one running balance for a business. It keeps separate program accounts under a business number, and its own guidance treats payroll, GST/HST and corporate income tax as three accounts, each with its own filing and payment procedures. A debt cleared in one can sit unpaid in another, so a buyer checks each account rather than asking whether the business “owes the CRA” in general.

What to ask for on each account

For payroll, the CRA says an account cannot be closed until all source deductions are remitted and the final information returns are filed, so a seller who is winding down should be able to show both. For GST/HST, closing means filing a final return and remitting any amount owing. For corporate income tax, ask for proof that returns are filed to date. A seller who can produce current statements for all three has answered most of the question, and one who cannot has not answered it yet.

Why the deal structure changes the answer

In a share purchase the corporation itself does not change. The CRA’s guidance is to update the director and owner details on its existing records, so whatever the corporation owes stays with it, and you now own the corporation. In an asset purchase from a sole proprietor, the CRA says a new owner cannot keep using the old business number and must get new program accounts, so the seller’s accounts and any balance in them stay behind. Whether a CRA amount can reach an asset buyer in other circumstances is a question for your lawyer.

Directors, timing and the agreement

If you will become a director of the corporation you buy, note that the CRA warns of legal implications for outgoing and incoming directors and points to its circular on directors’ liability. Statements also show only the day you ask, so repeat the check close to closing and write the position into the agreement, with a holdback or indemnity if you want a backstop. The answer on checking a business for unpaid taxes covers the confirmation step.