In an August 16, 2017 Tax Court of Canada case (Radelet vs. H.M.Q., 2015-2089(IT)G), at issue was whether a waiver (Form T2029) signed by the taxpayer was enforceable such that CRA could assess the taxpayer beyond the normal reassessment period. The taxpayer asserted that the waiver was executed under duress and/or coercion and that the taxpayer failed to understand that the normal reassessment period was extended by the waiver.

2017-10 WAIVER – IS IT ENFORCEABLE?

In an August 16, 2017 Tax Court of Canada case (Radelet vs. H.M.Q., 2015-2089(IT)G), at issue was whether  a waiver  (Form T2029) signed by  the  taxpayer  was  enforceable  such  that  CRA  could  assess  the taxpayer  beyond  the  normal  reassessment  period.  The  taxpayer asserted that the  waiver  was executed under duress  and/or coercion and that the taxpayer failed to understand that the normal reassessment period was extended by the waiver.

Due to the taxpayer’s travels (he spent the winter in Mexico and was very difficult to contact) and health conditions, CRA offered an extension to provide documents  in  exchange  for  a  signed  waiver.Without  a  signed  waiver,  CRA  would  issue  a reassessment  which  was  not  favourable  (and included  gross negligence penalties) to the taxpayer.

Taxpayer loses: The Court opined that the waiver was enforceable. The taxpayer was not unduly ressured, misled or unduly influenced to an extent which would nullify the waiver. Further, the Court found that the taxpayer did not lack the mental capacity to understand the nature of the waiver and that he intended to waive the normal reassessment limitation period described in the waiver. The Court also noted that there was no situational or physical intimidation; inclusion of gross negligence in the proposal letter was not unreasonable; and documented communication indicated a cordial, normal and considered tone.

Comments-A  waiver  extends  the  normal  reassessment  period  indefinitely.  As such, practitioners should consider  submitting a Notice of Revocation Waiver  (Form T652) to limit the reassessment period.  The revocation is effective  6  months  after  the  day  it  is  filed,  essentially  limiting  the waiver period to 6 months.Also, practitioners should ensure that the waiver clearly indicates the specific issues to which it applies.  The taxpayer need not sign a waiver for the entirety of the return. Once a reassessment has been issued, the taxpayer is permitted to file a Notice of Objection in respect of any issues, regardless of whether they were included in the waiver.The waiver only permits CRA to reassess after the statute-barred date which would have otherwise applied and only for the issues specified in the waiver.

VOLUNTARY DISCLOSURES

On August 8, 2017, the  Joint Committee on Taxation  of The Canadian Bar  Association  and  CPA  Canada  submitted  their  comments  to  the Minister  of  National  Revenue,  Diane  Lebouthillier,  on  the  proposed changes  to  the  Voluntary  Disclosures  program.  The  document highlights  a  number  of  concerns  with  the  proposals  that  practitioners should be aware of. For example, it noted that certain taxpayers may be prohibited from acceptance into the program, where in the old program they may have been accepted.  It also provides a comparison of different types  of  relief  that  may  be  available  to  different  types  of  taxpayers (General vs. Limited program).

For a detailed discussion of the proposals, which aim to be effective on January  1,  2018,  see  VTN  431(9).  The  proposals  are  expected  to  be finalized in the fall of 2017.

Comments-Practitioners  should  review  scenarios  where,  under  the  proposed program, taxpayers may not receive relief as currently provided(either  due  to  not  being  accepted  into  the  proposed program at all or being accepted into only the Limited program).  For example, income from the proceeds of crime will no longer be  accepted.  As well, there may only be  limited  relief  where  large  amounts  are  involved,  the  taxpayer  is sophisticated, or there are multiple years of non-compliance.  Practitioners may consider submitting applications before 2018 in cases where future relief may be limited

SPECIFIC LEGISLATION VS. PARLIAMENT’S INTENT

In a November 4, 2016 Tax Court of Canada case (Athabasca  University  vs.  H.M.Q.,  2014-1301(GST)G), at issue was whether books supplied to students as part of their distance learning course would  be  taxable  supplies  (require  a  GST/HST charge) or not.

Of  particular  interest,  however,  was  whether  the specific legislation  or  Parliament’s intent behind the  legislation  should  be  used  to  determine  whether  Parliament’s intent was relevant in the application of the law in this matter.

The  Court  opined  that  where  the  legislation  is  clear  and unambiguous, the  parliamentary intent is  irrelevant.  The legislation indicated that the books would be considered part of one supply    the provision of educational services.  As such services are considered exempt, the provision of books would not be taxable.

Comments In  other  words,  it  is  Parliament’s  responsibility  to  ensure  the  intent matches the legislation. Only where unclarity or ambiguity exist should parliamentary intention be used.

BANKRUPTCY – CRA TRUST FUNDSIn a July 27, 2017  Federal Court of Appeal  case (H.M.Q. vs. Callidus Capital Corporation, A-400-15), at issue was  whether CRA could  collecttrust funds (GST/HST received but not remitted) from a taxpayer’screditor upon bankruptcy. Just prior to bankruptcy, when GST/HST was owed,  the  taxpayer  transferred  assets  to  one  of  its  other  creditors (CreditCo).  This  case relates  to  CRA’s  attempt  to  obtain  assets  from CreditCo.

Creditor losesThe Court opined that since the assets were not held by the taxpayer upon bankruptcy, Subsection 222(1.1) of the Excise Tax Act (which releases a taxpayer’s trust debt upon bankruptcy) would not absolve the taxpayer’s GST/HST  liability.  Therefore,  CRA  was  entitled  to  pursue unremitted GST/HST from CreditCo that had been paid prior to bankruptcy.

INTEREST  PAYABLE  ON  REFUND    REVERSED JEOPARDY ORDER

An August 9, 2017 Federal Court of Appeal  case (Grenon vs. H.M.Q., A-239-16) overturned a May 11, 2016,  Tax Court of Canada case  (Grenon vs. H.M.Q., T-1013-15, see VTN 421(9)) which found that interest was not required  to be paid by CRA on $12.75 million  obtained  by CRA  as aresult of a  Jeopardy Order,  but then fully refunded to the taxpayer.

Taxpayer wins-The FCA determined that the original decision  was  neither reasonable nor  correct.  This  was  primarily  because  the  FCA  determined  that the Minister is not relieved from paying interest due to a Jeopardy Order in the case where an Order is cancelled or set aside.

Interest on the amount was ordered to be paid (Subsection 164(3)).

2017 T1 TAX FILING STATISTICS

CRA has released its filing statistics for the 2017 personal tax-filing season covering the period from February 13, 2017 to August 7, 2017.

 

Efile

Netfile

Paper

Total

Year  

Number

% 

Number  

% 

Number  

% 

 

2017

16,005,283 

57% 

8,212,118 

29% 

3,869,830 

14% 

28,087,231

2016

16,246,107 

56% 

8,071,902 

28%

4,728,642 

16% 

29,046,651

2015

15,720,437 

55% 

7,662,876 

26% 

5,397,643 

19% 

28,780,956

2014

4,937,178 

53% 

7,197,415 

25% 

6,162,087 

22% 

28,296,680

CRA also noted that 68% of the refunds  were issued by  direct deposit.