Can More Than One Person Be Penalized for a Trust’s T3 Filing Failure?

A recent CRA internal technical interpretation raises an interesting question: if a trust fails to file a T3 return, fails to respond to a demand to file, or makes a related false statement or omission, can CRA assess the penalty against more than one person?

The short answer is: yes, in principle — but CRA appears to take a restrained approach.

CRA acknowledged that more than one person or partnership could technically meet the statutory conditions for liability under subsection 163(5) of the Income Tax Act. That means the penalty is not necessarily limited to the trust alone.

However, CRA also stated that, in most cases, one assessment against the trust itself would normally be sufficient and appropriate to carry out the purpose of the Act and enforce compliance. In other words, CRA does not appear to view subsection 163(5) as a tool for automatically penalizing everyone connected to the trust filing process.

The important exception is where another person has separate, serious, or independent fault. If, for example, more than one person was responsible for making a relevant false statement or omission, CRA noted that more than one person or partnership could potentially be liable under subparagraph 163(5)(a)(i).

Another important point is priority. CRA indicated that subsections 163(5) and (6) are arguably more specific than the general late-filing and false-statement penalty provisions, including subsections 162(1), 162(2), 162(7), and 163(2). As a result, the subsection 163(5) penalty should generally take precedence where the facts fall within this more specific trust-reporting penalty regime.

The practical takeaway is simple: subsection 163(5) is not just a generic late-filing penalty. It is a specific trust-reporting penalty rule. CRA’s position suggests that the trust will usually be the primary assessment target, but additional persons may face exposure where their own conduct independently supports the penalty.

From a compliance perspective, this matters. Trustees, advisors, preparers, and others involved in T3 reporting should not assume that responsibility always stops with the trust. At the same time, CRA’s interpretation also suggests that multiple penalties should not be imposed automatically. The key question is whether there is separate conduct serious enough to justify separate liability.

Source: 

CRA T3 Trust Guide – 2025, “Penalties” section, which states that for a non-listed trust, a person or partnership may be liable where they knowingly or with gross negligence made, participated in, assented to, or acquiesced in a false statement or omission, failed to file a T3 return, or failed to comply with a CRA demand to file.

Income Tax Act, s. 163, especially s. 163(5), from Justice Laws.