Who Has the Burden of Proof in a Tax Appeal in Canada?

When you appeal a tax assessment, a natural question is who has to prove what. People often hear that the taxpayer has to challenge the assumptions the CRA made, and wonder what that means in practice.

This article explains the parts of the process that shape proof in the Tax Court of Canada: the pleadings, deemed admissions, documents and discovery. How the burden applies to your particular issue depends on the facts and the law, and a lawyer can confirm it for you.

This article covers Canadian federal tax law, which applies in every province.

What "burden of proof" means

The burden of proof is about which side must convince the judge of a point, and with what evidence. A judge decides each issue on the evidence in front of them, so what you can show with documents and witnesses matters a great deal.

Which side carries the burden on a given point depends on the issue in your appeal. That is something to confirm with a lawyer before you build your case.

The Crown's reply: where its assumptions appear

In the general procedure, the Crown must file its reply within 60 days after service of your notice of appeal. The reply must set out, among other things, the facts admitted and denied and the issues to be decided. The Crown's assumptions are also set out in the reply, and you may answer it.

Any answer to the reply is filed within thirty days after service of the reply. Treat the reply as a map: it shows which facts are agreed, which are disputed, and what the Crown says the case is about.

Deemed admissions and your notice of appeal

Allegations of fact in your notice of appeal that the Crown does not deny in its reply are deemed admitted. This is why the facts you set out in your notice of appeal matter. A clear, accurate statement of facts can narrow what must be proven at the hearing.

Documents and discovery

In the general procedure, each party files and serves a list of documents within thirty days following the closing of the pleadings. A party may apply for an order requiring a full list of relevant documents.

Examination for discovery lets each side question the other. A person examined must answer proper questions relevant to a matter in issue, and must notify the other parties if an earlier answer was wrong or incomplete. A party may read the adverse party's discovery evidence into its own case at the hearing.

• Gather receipts, contracts, bank records, emails and calendars that relate to the assessed items.
• Keep originals safe and work from copies.
• Note who has first-hand knowledge of each fact and could testify.
• Correct any earlier answer you realise was wrong or incomplete.

Informal procedure and evidence

In the informal procedure, the Court is not bound by legal or technical rules of evidence. The notice of appeal sets out reasons and facts in general terms. Even so, you should expect to explain your position with real documents and clear testimony.

Under the informal procedure, the Minister files a reply within sixty days after the notice of appeal is transmitted, and the Court fixes the hearing date.

If your file contains sensitive information, a hearing may be held in camera on a party's application where the circumstances justify it. A confidentiality order may be sought by motion under Rule 16.1 of the General Procedure Rules. What personal details you should remove from documents before filing them is worth confirming with the Court or a lawyer.

What to do next

• Read the assessment, your notice of objection and the Crown's reply side by side.
• List each assumption the CRA relied on and the evidence that answers it.
• Calendar the Crown's reply deadline of sixty days, your answer deadline of thirty days and the document list deadline of thirty days.
• Speak with a lawyer or accountant about who bears the burden on each of your issues.

If you and the Crown settle after an appeal is filed, the Minister may, with your written consent, reassess at any time to dispose of the appeal. In the general procedure, the Court may extend or abridge any time in the Rules on just terms. A written offer of settlement can also affect costs recovery, under the conditions set out in Rule 147. How these points apply depends on your situation, so it is worth confirming with a lawyer.

Frequently asked questions