When you disagree with a tax assessment from the Canada Revenue Agency (CRA), there are many avenues that allow you to try to resolve the issue without going to court, from administrative discussions with the CRA auditor all the way through the objection process. At the end of these steps, if the disagreement persists, you need to take it to the next level, the Tax Court of Canada (TCC).
The Tax Court of Canada
Established in 1983, the TCC is the court that has jurisdiction to hear litigation concerning your company’s income taxes, GST/HST and customs. The TCC’s jurisdiction is exclusive, which means that no other court can hear cases about these matters. The Court has 18 registry offices located throughout Canada and regularly hears cases in over 50 cities, so you’re sure to find one close to your company. Approximately 25 judges appointed by the federal government comprise the TCC. It’s completely independent of the CRA and has its own practice rules and procedures. Conducted in both French and English, its hearings offer interpreters in case you need them.
Filing an Appeal in the Tax Court of Canada
The proper way for your small business to begin proceedings before the TCC is to file an appeal. What you’re actually doing is appealing the CRA’s decision regarding your notice of objection, which is an appeal you file directly with the CRA. In this appeal, you argue that the CRA has in someone way misrepresented or miscalculated your tax bill.
A single judge hears and decides your case. The judge also evaluates the evidence based on the documents you submitted and an in-person hearing where your witnesses present evidence and face cross-examination by both you and the CRA.
You must file your appeal within 90 days of receiving the CRA’s decision on your notice of objection. Failure to do so results in the loss of your right to appeal. While it’s possible to receive an extension, it’s very rare and only occurs with the Court’s permission and in exceptional circumstances.
In all cases, you must file appeals in writing. When filing, you may choose between having your case heard under the informal procedure rules or the general procedure rules.
The Tax Court’s Informal Procedure
The TCC’s informal procedure is a simpler, quicker way to have your appeal heard. To use it, as of 2018, you must meet certain criteria and make the express choice of being heard under the informal procedure. If you don’t make a choice, the general procedure applies.
An appeal qualifies for the informal procedure if the disputed amount of your federal tax and penalties isn’t more than $25,000 per assessment, if the disputed loss amount is not more than $50,000 per determination, or if interest on federal tax and on penalties is the only matter in dispute.
The main benefit of the informal procedure is that the procedural rules and the rules for presenting evidence are more relaxed than in the general procedure. The goal is to resolve your appeal as quickly as possible. Within 180 days of being filed, a judge hears your appeal under the informal procedure, and you receive a judgement within 90 days of your hearing date.
There is no filing fee for filing an appeal under the informal procedure, and the court costs for the losing party are less than under the general procedure. Although legal representation is possible under these rules, you may also opt to represent yourself or have someone else, such as your accountant, make representations to the judge.
General Procedure in the Tax Court
The format of the general procedure offers a stricter set of rules and functions similarly to most superior courts in Canada. Specific rules apply regarding the filing of an appeal, rules of evidence, examinations for discovery, and production of documents.
There is also a filing fee, ranging between $250 and $550. In the general procedure, only lawyers may represent you if you don’t represent yourself, and lawyers must represent corporations. The losing party may have to pay some or all of the winning party’s legal costs.
Your appeal under the general procedure routinely takes more than a year before you appear before a judge, with some larger cases taking several years. Once the TCC rules in your appeal, you or the CRA may disagree with the ruling. In that case, you appeal the decision to the Federal Court of Appeals or even, in some cases, to the Supreme Court of Canada to review the case again and ask for another finding.
You always hope to avoid any issues with the CRA. One way to do that is to track your expenses at the time that they occur and understand the tax deductions available to you as a small business owner. You don’t want to pay more than you need to. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.