CRA Denied Your Voluntary Disclosure? Your Options in Canada

You came forward to the Canada Revenue Agency (CRA) to fix a tax problem, and the answer was not what you hoped for. Maybe the application was denied. Maybe it was accepted, but with less relief than you expected, such as prompted instead of unprompted. That is stressful, and it is easy to make the situation worse by reacting quickly.

This article explains how to read the decision letter, the common reasons for a denial, and the routes open to you afterwards. It applies to applications received on or after October 1, 2025, which fall under the CRA circular IC00-1R7. Earlier applications fall under the older circular IC00-1R6. Your facts matter a great deal here, so treat this as general information and not a substitute for advice on your own file.

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

Start with what the decision letter tells you

The CRA decision letter states the application type (unprompted or prompted), the relief level and the eligible tax years. If relief is denied, the letter gives the reason. Read it closely before you do anything else, because each part points to a different kind of problem.

• Application type: unprompted applications normally get 100% relief of applicable penalties and 75% relief of applicable interest.
• Prompted applications normally get 25% relief of applicable interest and up to 100% relief of applicable penalties.
• Eligible years: check whether every year you disclosed is listed, and whether any year was left out.
• Reason for denial: this tells you whether the issue is paperwork, timing, eligibility or something else.

An application is generally unprompted if the CRA has not communicated with you about the compliance issue, or if the only contact was a general education letter. It is generally prompted if it follows CRA communication identifying a specific error or setting a correction deadline, or follows third-party information about your non-compliance. If you were treated as prompted, compare that with your own history of CRA contact.

Common reasons for a denial or reduced relief

• The application was incomplete. The CRA may deny an application if requested information or documents are not provided within a reasonable timeframe, or for insufficient information or other non-compliance.
• The disclosure was not voluntary. This is the case if an audit or investigation had already been initiated against you or a related taxpayer for the disclosed information, including investigations by law enforcement, securities commissions or other federal or provincial regulators.
• The situation is not eligible. Examples include applications that produce a refund or no tax or penalties owing, requests for relief on penalties or interest already assessed, applications to make or alter an election, insolvency for the years involved, and matters tied to an advance pricing arrangement or a treaty competent authority agreement.
• The years are too old. The CRA's legal basis for cancelling penalties and interest is subsection 220(3.1) of the Income Tax Act, and the request must be made on or before the day ten calendar years after the end of the taxation year. Older years may get reduced or no relief.

A CRA letter or notice about a specific issue does not by itself end eligibility. If you are not under audit or investigation, the CRA treats the application as prompted, which means partial relief. So a prompted result is not the same as a denial, even though it is less generous.

Asking for a second administrative review

If you disagree with the decision, you can ask in writing for a second administrative review by the Assistant Director of the Shawinigan National Verification and Collections Centre. The CRA asks applicants to do this before applying for judicial review.

A written request is stronger when it is specific. Say which part of the decision you dispute, whether that is the prompted classification, a missing year, or the stated reason for denial, and attach any documents that support your position. If the denial was for incompleteness, supplying what was missing, with an explanation, is often the heart of the request. Whether it succeeds depends on the facts, so it is worth having a lawyer or accountant look at your letter first.

Judicial review in the Federal Court

Judicial review is in the Federal Court, using Form 301 Notice of Application and the filing fee. It generally must be filed within 30 days of the CRA's notification, and it follows the second review. That short window is why you should not wait to find out your options.

Judicial review is a separate step from the CRA's own review process, and the CRA asks you to complete the second administrative review before you apply for it. How a court would approach your particular decision depends on your facts, so it is worth confirming with a lawyer. Outcomes are never certain, and court filings have strict formal requirements, so legal advice on timing and grounds is sensible before you file.

What does not change, and what to do next

There is no right of objection to a VDP decision, so you cannot object to penalty and interest assessed under subsection 220(3.1). If you are not eligible, other options include the taxpayer relief provisions. Whatever the outcome, the VDP gives relief on penalties and interest, not on the tax itself, so the tax owing must still be paid. The CRA also reserves the right to audit any information in a VDP application whether or not relief is granted, and if it finds fraud or misrepresentation, an assessment may cover any year.

• Read the decision letter and note the application type, relief level, eligible years and any stated reason.
• Write down every date: when you applied, when the decision arrived, and any CRA contact before you applied.
• Do not ignore the tax owing; ask about a payment arrangement if you cannot pay, knowing approval is not guaranteed.
• Note the possible 30-day Federal Court window and speak to a lawyer early.
• Gather any documents the CRA said were missing.
• Use the CRA callback form if you need to ask about the status or the decision letter.

Frequently asked questions