To delay or not? Extensions by the CRA and the Tax Court of Canada

20 avril 2020

( Disponible en anglais seulement )

CRA has published its position on collections, audit, objections and appeals in light of the COVID-19 pandemic.

Most noteworthy, CRA’s stated positions are the following:

  • « Collections activities on new debts will be suspended until further notice, and flexible payment arrangements will be available. »
  • « Collections staff will address pre-existing situations on a case-by-case basis to prevent financial hardship. »

Note that collection enforcement proceedings on existing debt has not been suspended. Instead, a taxpayer can plead its case, on a case-by-case basis, to a collection officer.

  • « The CRA will generally not contact small or medium (SME) businesses to initiate any post assessment GST/HST or income tax audits… »
  • « Other audits are temporarily suspended. »
  • « For objections related to tax matters [other than those related to entitlement to benefits and credits] filed by individuals and businesses, the CRA is currently holding these accounts in abeyance. No collection action will be taken with respect to these accounts at this time. »

Note that the CRA has not announced a suspension of the daily compounding of interest.

  • « For objections that are due March 18, 2020 or later, we are effectively extending the deadline to June 30, 2020. »

We question this stated position and taxpayers must exercise caution. Here is the explanation for our view:

We are of the opinion that what the Income Tax Act (« ITA ») has ordered, the CRA does not have the ability to amend. In order for there to be a proper suspension of deadlines, there must be a federally legislated extension of ITA deadlines. For example, the federal government would have to release an order similar to the Ontario O. Reg 73/20. made under the Emergency Management and Civil Protection Act. The regulation ordered that any provision of any statute, regulation, rule, or by-law establishing any period of time within which any step must be taken in any proceeding in Ontario, including any intended proceeding, shall be suspended for the duration of the emergency. Without similar federal legislation, the taxpayer is at the mercy of the CRA’s discretion to grant extensions and allow late-filings of notices of objection.

Taxpayers generally have 90 days from the date that the CRA mails a notice of assessment to respond. If the taxpayer receives CRA notices by snail mail, it is a good idea to keep the envelope in which the notice came so that the postmark date is kept in the taxpayer’s records.

  • For appeals before the Tax Court of Canada (« TCC« ), the TCC has ordered that the period beginning on March 16, 2020, and ending on the day that is 60 days after the Court and its offices reopen for the transaction of business, is excluded from the computation of time under the rules of TCC.

Importantly, the TCC does not have the jurisdiction to extend ITA deadlines. Accordingly, it is suggested that appellants continue to file notices of appeal on time via electronic filing.

  • « Taxpayers who are unable to file a return or make a payment by the tax-filing and payment deadlines because of COVID-19 can request the cancellation of penalty and interest charged to their account. Penalties and interest will not be charged if the new deadlines that the government has announced to tax-filing and payments are met. »

The CRA does not explain the method by which to request cancellation, although we assume that the request to cancel penalties and interest will be made by way of a request for taxpayer relief, in the usual course.

The CRA website states that « While the CRA continues to accept requests for taxpayer relief during this period, there will be delays in processing requests. Once normal business operations resume, the Taxpayer Relief Program will review requests related to COVID-19 on a priority basis. »

The COVID-19 crisis is fast-moving and almost daily there are Ministry of Finance announcements at every level of government. Please contact a member of the Miller Thomson Tax Disputes Resolution Team to review your tax controversy if you have a deadline coming up.

 

Miller Thomson is closely monitoring the COVID-19 situation to ensure that we provide our clients with appropriate support in this rapidly changing environment. For articles, information updates and firm developments, please visit our COVID-19 Resources page.

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