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.
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.
