Tax Dispute Resolution During COVID-19 – CRA and Tax Court Responses

In response to the COVID-19 pandemic, Canada Revenue Agency (“CRA”) has suspended some of its activities and modified others. The Tax Court of Canada has also closed the Court and its Registry Offices across the country until further notice and issued a Practice Directive, Order and Notice to the Public and Profession. Our Tax Dispute Resolution group has summarized relevant changes here.

CRA Collections

CRA has indicated that no collections activities will take place on new debts until further notice. In respect of existing debts, CRA has stated that “Collections staff will address pre-existing situations on a case-by-case basis to prevent financial hardship”, and indicated that flexible payment arrangements will be available.

Although this is a welcome break from tax collections efforts for many taxpayers, we recommend taking a proactive approach to communicating with CRA Collections once activities resume.

Requirements to Pay

CRA has advised that banks and employers are not required to comply with or remit on existing Requirements to Pay at this time.

CRA Audits

According to CRA, small or medium-sized business (i.e. corporations that, together with all related corporations, do not employ $10M of taxable capital in the tax year) will generally not have new audits initiated. Most audit activity appears to be suspended, with an exception for “high risk and exceptional cases, or cases of high risk GST/HST refund claims.”  Audit activity may also resume in the near future with respect to certain complex cases.

In addition, CRA has clarified that individuals who received letters asking for validation or supporting information relating to their T1 are presently not required to take any action.

CRA Appeals Division

With the exception of objections where a taxpayer’s entitlement to a benefit or credit is in issue, CRA Appeals Division has suspended their review of filed Notices of Objection. CRA also states that no collection action will be taken with respect to suspended Notices of Objection. However, this only affects certain types of appeals that are not subject to the usual stay on collections activity that applies to most objections.

CRA has also created an automatic deadline extension so that Notices of Objection that would normally be due between March 18, 2020, and June 30, 2020, are now due on June 30, 2020, instead.

Appeals to the Tax Court of Canada

As of April 17, 2020, the Tax Court of Canada extended its cancellation of all sittings and conference calls that were scheduled between March 16, 2020, and May 29, 2020, and may modify its sitting and conference call schedule further on or before May 20, 2020.

Timelines on Tax Court matters are suspended as of March 16, 2020, and will not resume until 60 days after the Court reopens (which date is not determined as of the time of writing).

Notices of Appeal filed during the suspension will be treated as if they include an Application for Extension of Time to Appeal brought on the basis that COVID-19 has prevented timely filing.  After an appeal is filed, the Minister of National Revenue is required to respond to say an extension is not necessary, to consent Notice of Appeal, or to oppose the extension.

See the Practice Direction and Order here. The Notice to the Public and Profession issued on April 17, 2020 by the Tax Court of Canada is available here.

Conclusion

The ongoing pandemic has caused far-reaching issues for businesses and individuals, and will continue to do so. Thankfully, many CRA activities are suspended, granting a welcome reprieve for Canadians with tax disputes during these uncertain times.

For more information, please visit CRA’s official webpage, last updated April 24, 2020, and the Tax Court of Canada’s website.

Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.