A British Columbia judge has ruled that individuals who charge friends to prepare tax returns owe them the same duty of care expected in a professional business relationship, even if the fee is relatively small.Blacklock's Reporter says the decision came after a Vancouver woman was ordered to pay damages for providing incorrect tax advice that left a small business owner owing thousands of dollars in unpaid GST."I accept that friends can become clients and clients can become friends," B.C. Provincial Court Judge Tim Hinkson wrote in his decision."However I find this relationship was primarily a service-based relationship between a service provider and a client that had some of the niceties of a friendship."The case involved Erin Chen, an administrative clerk who charged approximately $500 annually to prepare tax returns for a friend who operated a small business.Chen assisted with the business's tax filings between 2018 and 2022.According to the ruling, Chen incorrectly advised the business owner that GST did not have to be collected or remitted until annual revenue exceeded $30,000 per quarter.In reality, GST registration is generally required once taxable revenues exceed $30,000 over a 12-month period.The mistake was discovered in 2022 after the business owner, Ruby Smith of Victoria, hired a certified bookkeeper.By that point, unpaid GST obligations had reached $12,673.Judge Hinkson concluded that although Chen's fees were modest, the arrangement constituted a commercial relationship rather than a personal favour."Although Ms. Chen charged a nominal fee, I am not satisfied this was out of generosity or that work was being done as a favour," he wrote.The court also found Chen represented herself as an accountant despite lacking professional credentials..Evidence showed invoices described her as an "accountant for small business," even though she held no certification or licence as an accountant, tax preparer, bookkeeper or business adviser."Ms. Chen's conduct in holding herself out as an accountant in 2022 and 2023 when she was not is so egregious that it obviously falls short of the standard of care," Hinkson wrote.The judge said Chen's conduct gave Smith the impression she was receiving advice from a qualified professional."Ms. Chen allowed Ms. Smith to believe she knew what she was doing, lulling Ms. Smith into a false confidence that she was receiving proper accounting advice from a qualified professional," he wrote.The court ordered Chen to pay Smith $6,012 in damages, roughly half of the unpaid GST liability.The award was reduced because the judge found Smith was partly responsible for failing to independently verify Canada Revenue Agency requirements."On a balance of probabilities I am satisfied Ms. Chen was at least vague about her qualifications when she was approached by Ms. Smith," Hinkson wrote."He believed she could become an accountant and held herself out as an accountant in 2022 and 2023. I am satisfied Ms. Chen allowed Ms. Smith to believe she had greater qualifications than she in fact had."
