Introduction – Self-Supply, Fair Market Value, and Why Valuation Evidence Often Decides the Case
In Caddell v. The King, 2026 TCC 27, the Tax Court of Canada examined whether two individual taxpayers were required to self-assess and remit GST under the self-supply rules in subsection 191(1) of the Excise Tax Act (aka GST 191) after occupying a newly constructed home.
While the Court addressed three main issues—builder status, the availability of the personal-use exception in subsection 191(5), and fair market value—the decision ultimately hinges on a point that is often underestimated in practice: how fair market value is determined, challenged, and accepted when self-supply is triggered.
Once the Court concluded that the taxpayers were “builders” and that subsection 191(5) of the Excise Tax Act exception did not apply, the legal outcome became largely fixed. At that stage, the dispute narrowed to a single, consequential question with immediate tax implications: what was the property’s fair market value on the self-supply date? That valuation determined the deemed consideration for the notional sale and, therefore, the amount of GST the taxpayers were required to collect and remit to the CRA.
The taxpayers used British Columbia assessment values, adjusted for average deviations in local sales, to determine a fair market value of approximately $775,000. The CRA, on the other hand, relied on a professional appraisal prepared by an accredited appraiser using recognized valuation methods and comparable sales analysis, concluding that the fair market value was $915,000. Although the numerical difference may seem modest in percentage terms, it resulted in a significantly higher GST liability and was a key issue in the appeal.
Rather than revisiting questions of intention, personal circumstances, or perceived fairness, the Court focused on the quality of the evidence, methodology, and internal consistency with market data. The case, therefore, illustrates a recurring and highly practical lesson in GST self-supply litigation: once liability is established in principle, valuation evidence—not narrative evidence—drives the outcome.
For taxpayers and advisors, Caddell demonstrates that fair market value disputes are rarely won without disciplined appraisal evidence, and that early guidance from an experienced Canadian tax lawyer can be critical when self-supply exposure arises.
What is the self-supply rule?
Under subsection 191(1) of the Excise Tax Act, the self-supply rules apply when a builder either personally occupies or rents out a residential property (such as a residential home, condo unit, or apartment building) after constructing or substantially renovating it. If either rule applies, the builder is considered to have sold and then repurchased the property at its fair market value. The builder must include the GST/HST payable on the fair market value of the built or renovated property when calculating their net tax payable.
Subsection 191(5) of the Excise Tax Act removes the self-supply rules if the builder used the built or renovated property mainly as their residence after construction was finished. The personal-residence exception also applies if the builder’s spouse, former spouse, or relative used the property as a residence after the builder completed construction. However, the personal residence exception would apply in the following cases:
- The builder is a corporation;
- The builder claimed input tax credits for acquiring or enhancing the property; or
- After its construction or renovation, the built or renovated property was used primarily for a purpose other than as the place of residence of the builder or the builder’s spouse, former spouse, or relative.
Seven Builds, Five Sales, One Disputed Self-Supply
Dustin and Breanne Caddell are spouses who, over eleven years, acquired seven residential properties in British Columbia and sold five of them. Several of those properties were purchased as bare land, developed by them through owner-builder arrangements, occupied by the family for a period, and later sold for a profit. The property at issue—600 Tercel Court in Mill Bay—followed the same general pattern.
The couple acquired the property as vacant land in June 2015 and built a detached single-family home. Construction was finished, and they first occupied the home in March 2016. The couple lived there while raising their young family and listed it for sale later that same year. Although the initial listing was withdrawn, the property was eventually sold in July 2017 for 989,000.
After reviewing the couple’s real estate activities, the CRA tax reassessed both spouses for GST, determining that each was a “builder” who had made a self-supply of the newly constructed residence upon first occupancy. The tax reassessments denied the personal-use exception under subsection 191(5) of the Excise Tax Act and imposed GST based on a deemed fair market value of $915,000 as of the self-supply date. The appellants appealed, disputing builder status, the application of the self-supply rules, and—most importantly—the fair market value used to calculate the tax.
These appeals were heard together on common evidence before the Tax Court of Canada, bringing into focus not only the legal scope of the self-supply provisions, but also the practical importance of valuation evidence once those provisions are engaged.
Builder Status: When Repetition Turns Homebuilding into a Trading Activity
The first issue before the Court was whether the appellants qualified as “builders” within the meaning of subsection 123(1) of the Excise Tax Act. This determination was foundational: without builder status, the self-supply rules in subsection 191(1) would not apply.
The spouses argued that they constructed the subject property as a family home, not as part of a business, an adventure, or a concern in the nature of trade. The CRA took the opposite view, pointing to the appellants’ long-standing pattern of acquiring land, constructing homes, occupying them briefly, and selling them at a profit.
Applying the well-established factors from Happy Valley Farms Ltd. v. R.—including the nature of the property, length of ownership, frequency of transactions, work performed, circumstances of sale, and motive—the Court concluded that the appellants’ conduct could not be viewed in isolation.
Over an eleven-year period, they purchased seven properties and sold five, with multiple transactions involving new construction followed by resale. Although the property could serve as a family residence, the overall pattern of repeated construction and resale activities heavily influenced the Court’s assessment against the spouses.
The Court emphasized motive and overall conduct. Prior profitable sales, early listing of the property, and ongoing real estate activity after selling the property undermined the claim that the home was built mainly for long-term personal use.
In the Court’s view, actions spoke louder than stated intention. Taken together, the evidence showed that the appellants were involved in a trade or business-like activity and thus qualified as “builders” under the law. As a knowledgeable Canadian tax lawyer would expect, this conclusion effectively set the scene for applying the self-supply rules.
The Personal-Use Exception: Why Living in the Home Was Not Enough
Having established that the appellants were builders, the Court then examined whether they could still avoid self-supply by relying on the personal-use exception in subsection 191(5) of the Excise Tax Act. That provision aims to protect individual builders who genuinely construct and use a home primarily as a place of residence, without claiming input tax credits and without using the property for other purposes. The appellants argued that they resided in the property as their family home and that any eventual sale reflected changing personal circumstances rather than a profit-oriented plan.
The Court accepted that mere future plans to sell do not automatically defeat the exception, citing Coates v. R. for the proposition that a secondary intention to resell is not fatal where a home is used primarily as a residence. However, the Court carefully limited that principle. It distinguished situations where resale is a contingent or secondary consideration from cases where the primary purpose of acquisition and construction is sale at a profit, with occupancy serving a temporary or instrumental role.
Relying on Lacina v. R. and Strumecki v. R., the Court highlighted that subsection 191(5) necessitates an “enduring quality” of residential use. In this case, the appellants’ reason for selling—based on dissatisfaction with the bedroom layout—was found unpersuasive, particularly given their familiarity with the design and extensive experience with previous builds. When considered alongside the appellants’ repeated pattern of similar transactions, the Court determined that the property was used primarily as inventory rather than as a residence.
As a result, the subsection 191(5) exception did not apply. Once again, the decision illustrates a recurring theme in GST self-supply jurisprudence: occupancy alone is not determinative. What matters is the primary use of the property in light of the taxpayer’s overall conduct. For taxpayers alike, the case underscores why early, strategic analysis by a top Canadian tax lawyer is critical when personal-use arguments intersect with a history of real estate development and resale.
Fair Market Value and Self-Assessment: Where the Real Tax Cost Is Set
Once the Tax Court determined that the appellants were builders and that the personal-use exception in subsection 191(5) did not apply, the remaining issue was not whether GST was payable, but how much. Under the self-supply regime in subsection 191(1) of the Excise Tax Act, a builder who occupies a newly constructed home is deemed to have made a taxable supply and to have collected GST on the fair market value of the property. That deemed tax must then be self-assessed and remitted to the CRA. In practical terms, fair market value becomes the tax base, and even relatively small valuation disputes can lead to significant GST exposure.
The Court set the self-supply date as March 18, 2016, based on the later of substantial completion and first occupancy. The appellants argued that the fair market value at that time was approximately $775,000, relying primarily on British Columbia assessment values adjusted by considering average deviations observed in local sales. The CRA, however, relied on a professional appraisal prepared by an accredited AACI appraiser using standard valuation methods and comparable sales analysis, which determined that the fair market value was $915,000.
The Court had little difficulty preferring the CRA’s evidence. It emphasized that provincial assessment values are mass appraisal tools designed for property taxation purposes and are not a substitute for an individualized fair market value appraisal. The appellants’ percentage-based adjustments and reliance on insurance values were viewed as methodologically weak and internally inconsistent. By contrast, the CRA’s appraisal followed an accepted professional framework, applied reasoned adjustments to comparable properties, and was prepared by an experienced valuation professional.
The Court also conducted a practical “reality check.” The subject property was listed for sale at $969,000 approximately six months after the valuation date and ultimately sold for $989,000 within sixteen months. Given that context, a valuation of $915,000 as of March 2016 was reasonable and commercially plausible, while the appellants’ proposed value seemed like an outlier. The Court accepted the CRA’s valuation in full.
This final issue underscores the most consequential lesson of the case. In self-supply situations, intent, personal circumstances, and fairness arguments largely fall away once liability is established. The quantum of tax is driven by fair market value, which is determined by evidence quality, not narrative. A builder who fails to self-assess GST using a defensible valuation exposes themselves not only to reassessment, but also to interest and potential penalties. As Caddell illustrates, the difference between an informal valuation and a professional appraisal can define the entire financial outcome of the dispute.
For taxpayers facing potential self-supply exposure, the case serves as a cautionary reminder: the obligation to self-assess is inseparable from the obligation to value correctly. Engaging an experienced Canadian tax lawyer early—before positions harden and tax reassessments issue—can be critical in identifying valuation risk and ensuring that fair market value is supported by evidence capable of withstanding scrutiny from both the CRA and the Tax Court.
Pro Tax Tips – Why Self-Supply Cases Are Won or Lost on Three Requirements
The decision in Caddell v. The King illustrates that GST self-supply disputes rarely turn on sympathy, personal circumstances, or the taxpayer’s subjective sense of fairness. Instead, outcomes depend on whether three statutory requirements are satisfied—and, once they are, how well the resulting fair market value is supported. When all three elements are met, the self-assessment obligation arises automatically, leaving little room for equitable arguments.
First, the taxpayer must qualify as a “builder” within the meaning of subsection 123(1) of the Excise Tax Act. This determination looks beyond labels and stated intentions and focuses on the taxpayer’s overall course of conduct. Repeated construction and resale activity, short holding periods, and a demonstrated capacity to profit from development can convert what appears to be personal homebuilding into an adventure or concern in the nature of trade. Builder status is often where liability is effectively decided.
Second, the taxpayer must occupy the newly constructed home after substantial completion as the first occupant, thereby triggering the self-supply rule in subsection 191(1). Once this occurs, the law deems a taxable sale to have taken place, regardless of whether the taxpayer ever intended to sell at that moment. At this stage, the focus shifts away from intention and toward compliance.
Third, the taxpayer must be unable to rely on the personal-use exception in subsection 191(5). While that exception can protect genuine owner-occupied residences, it applies only where the home is used primarily as a place of residence and not as inventory. Temporary occupancy or explanations that do not withstand scrutiny against a broader pattern of transactions will not suffice. Occupancy alone is not enough; primary use is decisive.
From a practical perspective, taxpayers who may satisfy all three requirements should recognize that the real exposure lies in the self-assessment obligation based on fair market value. Once self-supply is triggered, valuation becomes the tax base, and informal or unsupported estimates are unlikely to withstand CRA scrutiny. Engaging a top Canadian tax lawyer at an early stage—before self-assessment positions are taken or tax reassessments are issued—can be critical in identifying whether these three requirements are met, assessing valuation risk, and ensuring that any reported fair market value is defensible.
As Caddell demonstrates, self-supply cases are not merely about whether GST applies in principle. They are about whether the statutory conditions are satisfied in fact and whether the taxpayer has taken informed, well-supported positions before CRA intervention. Early, strategic advice from an experienced Canadian tax lawyer can make the difference between manageable compliance and costly reassessment.
Caddell v. The King shows that GST self-supply disputes rarely turn on fairness or personal explanations. They usually turn on whether three statutory requirements are met—and, if they are, whether the FMV used for self-assessment can actually be defended. First, confirm builder status under subsection 123(1) of the Excise Tax Act. Repeated buy-build-sell activity, short holding periods, and a profit pattern can push a “family home” fact pattern into an adventure or concern in the nature of trade.
Second, verify whether the first occupancy after substantial completion triggers subsection 191(1). Once a builder occupies the new home, the law considers it a taxable sale, and the GST becomes a self-assessment issue, not an intention issue. Third, assess whether subsection 191(5) can realistically apply. Living in the home is not sufficient if, from an objective standpoint, the primary use appears more like inventory than a permanent residence.
If the three requirements point toward self-supply, treat valuation as the risk driver. GST is computed on FMV, and informal estimates (including adjusted assessment values) often fail against a professional appraisal. This is the stage where early review by a top Canadian tax lawyer can materially reduce reassessment risk and help ensure the FMV position is supportable before CRA scrutiny.
FAQ – Key Questions on GST Self-Supply, Fair Market Value, and CRA Tax Reassessments
1. Does living in a newly built home prevent the GST self-supply rules from applying?
No. Occupying a newly constructed home does not, by itself, prevent self-supply under subsection 191(1) of the Excise Tax Act. If the individual qualifies as a “builder” and is the first occupant after substantial completion, a deemed taxable sale occurs automatically. The personal-use exception in subsection 191(5) applies only when the home is used primarily as a place of residence and not as inventory. As Caddell shows, temporary or short-term occupancy, when viewed alongside a broader pattern of construction and resale, may not be sufficient.
2. Why does fair market value matter so much once self-supply is triggered?
Because GST is calculated on the fair market value, not on construction cost, assessed value, or the taxpayer’s estimate. Once self-supply applies, fair market value becomes the tax base. In Caddell, the difference between the taxpayer’s proposed value and the CRA’s appraisal translated directly into a materially higher GST liability. Courts consistently prefer professional, methodologically sound appraisals over informal calculations or adjusted assessment values.
Disclaimer: This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.