A “Requirement To Pay” or an “RTP” is a tool which is used to collect money which business clients owe the CRA. The way an RTP works is that the collector issues an RTP to a party which owes money to the taxpayer. It is usually a client of the taxpayer who is likely to have to pay them at some point. The RTP directs the recipient to send future payments (up to the total tax debt) directly to the CRA. Those who choose to disregard these RTPs can be penalized by assessing the amounts they didn’t remit against them.
Technically a wage garnishee is an RTP which is sent to an employer. The difference between a wage RTP and a trade RTP is that the latter is garnisheed at 100%. The reason for this difference is that the CRA realizes that people still need to pay for the necessities of life. So personal RTPs are limited. For businesses there is no limit. And when the business is no more than one person running the corporation, a 100% RTP prevents the person behind the corporation from eating. But have no fear, these 100% RTPs can be reduced through negotiation.
So any trade receivable is subject to being intercepted by the CRA simply by sending them an RTP. And then the additional problem which arises is that clients of the business now know that the business is experiencing tax (and financial) trouble – and the RTP itself identifies the size of the tax debt, which can be a source of embarrassment. I have seen many instances where this has caused clients to take their business elsewhere to outfits which are likely to be around long enough to satisfy the contract.
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