Canada Revenue Agency (“CRA”), in this case along with Health Canada, regulate and enforce non-compliance with the Excise Act, 2001 (SC 2002, c 22), not to be confused with the Excise Tax Act (R.S.C., 1985, c. E-15).

The client came to us after CRA and Health Canada ruled that they were manufacturing vaping products without the required licenses and assessed approximately $3,500,000 in penalties, with accruing daily interest of course. In fact, the client does have a license and is a successful vaping business. We filed an appeal, ongoing, arguing that the assessment was based on a misunderstanding of location and warehouses to which the license applied and the operations of each.

At the same time, CRA is auditing additional years and transactions for the client’s multiple corporations. Recently, for one of the multiple ongoing audits, we were able to prevent the assessment of a lower penalty for alleged Unpackaged Vaping Products.

A Notice of Objection was filed against four statute barred Notices of Reassessment resulting from a Net Worth Audit of an individual and related corporation. As a result of the Notice of Objection, the CRA appeals officer reduced the income inclusion of ~$500,000 in one particular taxation year by ~$250,000 along with the corresponding gross negligence penalties. The other years were all reduced but by lesser amounts. CRA also reduced the income of one of the corporation’s taxation years by ~$184K along with smaller reductions to the other two taxation years. In total, over a $600,000 income reduction by the CRA appeals officer. The taxpayer is appealing further to the Tax Court of Canada.

It took multiple submissions to CRA appeals before available losses were applied reducing the majority of the assessed tax owing for our client.

Our client’s representative retained us to appeal the denial of medical expenses. With a Notice of Objection all expenses denied by the CRA Auditor were correctly allowed by the CRA Appeals Officer. Similar expenses being reviewed by CRA for a subsequent taxation year, in approximately the same amount,  were also allowed.

A Director of a corporation can be held personally liable for tax debts of a corporation under certain conditions. One being that a Director must be assessed within 2 years of resignation.

Our client, a student at the time, was listed as a director of a corporation that he had very little involvement with. Foreign persons paid him to complete the incorporation and prepare a website. After that he was not involved with the corporation and was not aware he was listed as a director nor the potential tax liability that attracted.

Years later, the corporation was assessed for over $10,000,000 in GST/HST and the legal collection notices were addressed to our client and the corporation. First, we had our client resign according to the statute imposed specifications.

We then made multiple written submissions to CRA supported by the facts, evidence and relevant law including that our client was at most a nominal director during the period the tax arrears accrued. Ultimately, CRA accepted our client’s position and he no longer faces the risk of personal liability for over $10,000,000 in GST/HST.

We filed a notice of objection on behalf of our client arguing that the Canada Revenue Agency’s audit decision was incorrect. CRA claimed our client had unreported cryptocurrency capital gains and assessed an extremely high gross negligence penalty. Our objection was allowed in full, with the removal of over $100,000 of capital gains and the deletion of a gross negligence penalty of over $375,000.

As a result of an audit, CRA readjusted the majority of our client’s filing position substantially increasing the tax owing. With a Tax Court Appeal we were able to reverse ~50% of CRA’s reassessments.

A United States Financial Technology (Fintech) corporation with $2B in assets sought a legal opinion on the tax implications related to a Canadian entity. Research was conducted accordingly and eventually we created and implemented the Canadian corporation.

CRA has been targeting subcontractor expenses. A CRA auditor denied 100% of our client’s Input Tax Credits for GST/HST paid on subcontractor expenses and applied Gross Negligence Penalties. With a Notice of Objection we recovered $555,932.62 of $684,890.81 including removal of the Gross Negligence Penalties. With a second Notice of Objection we recovered approximately 90% of the outstanding Input Tax Credits.

The corporation conducted innovative work but a significant portion of their SR&ED tax credit claim was denied in this particular year. The client was technically advanced and handled the audit without representation. However, about 50% of their claim was denied after audit.

We were retained to appeal the SR&ED claim denial in the Tax Court of Canada. To do that we first filed a Notice of Objection and 90 days following we filed a Tax Court Appeal. We drafted and submitted highly technical pleadings and the appeal was settled early. In subsequent years, the client’s SR&ED tax credit claims were accepted as filed without audit.

Wolf Industrial Systems Inc. v. The Queen – 2017-413(IT)G 

The client, who resided in Europe but had lived in Canada for a period, failed to report Canadian source income for many years, including from multiple investments with a Canadian bank. He also received child tax benefits as a non-resident of Canada. We filed a detailed voluntary disclosure application and requested 90-days to file the requisite tax returns and a payment plan for the tax owing. The disclosure was accepted under the General program which ensured no financial penalties  (50% of the tax owing) as well as no criminal penalties and partial interest relief for the tax owing.

A client’s successful business was subjected to a Net Worth Audit, which the Tax Court of Canada refers to as a “blunt instrument.” 

The business accounting books and records were in poor shape and the client used bank accounts for both personal and business transactions, in significant amounts. The auditor reviewed the client’s records and bank accounts and decided to assume that all business income that flowed through a personal account was attributed directly to her. She reported $70,000 in income that year. 

Nevertheless, CRA increased her personal income by over $2,600,000, relying on the assumption that all the funds that streamed in and out of a personal account were paid directly to her. Any experienced Tax Lawyer or Accountant will tell you that punitive inflated audit outcomes such as this are not uncommon, especially if the taxpayer is unrepresented.

A Tax Lawyer disputed the Net Worth Audit tax assessment. A Notice of Objection was filed in an effort to convince a CRA Appeals Officer that the auditor’s accounting was indefensible in court.

If the inflated assessment wasn’t appealed, the client would have lost her business due to CRA collections actions making it impossible for her to function (e.g. seizing bank accounts or operating lines of credit). Or she would have been forced into bankruptcy. Either way a successful business and jobs would have been destroyed for naught.

CRA has been targeting subcontractor expenses. A CRA auditor denied 100% of our client’s Input Tax Credits for GST/HST paid on subcontractor expenses. With two Notices of Objection we recovered about 95% of the Input Tax Credits. Below is a result of the second Notice of Objection.