Can I as a director be personally liable if my corporation fails to remit source deductions to the CRA?

Yes. This is one of the most practically significant personal liabilities a director can face. Under the federal Income Tax Act, directors of a corporation are jointly and severally liable for the corporation's failure to remit source deductions — income tax, CPP contributions, and EI premiums deducted from employees' pay — along with any related interest and penalties. The Canada Revenue Agency can assess a director personally after certain steps are taken to collect from the corporation.

The liability is not automatic. Before assessing a director, the CRA must generally first attempt to collect from the corporation. But once those steps have been completed, a director assessment can follow quickly. Directors have two years from the date they resigned or ceased to act as a director to be assessed; after that, the limitation period provides a defence.

Critically, there is a due diligence defence: a director who exercised the degree of care, diligence, and skill that a reasonably prudent person would have exercised in comparable circumstances can escape the liability. This means directors should have systems in place to verify payroll remittances are made on time. Leaving remittances entirely to an employee or accountant without oversight is unlikely to satisfy the standard. If your corporation is struggling financially and remittances are at risk, speak with a tax lawyer immediately — options may exist to limit or avoid director liability.