- The informal procedure applies where the total amounts in issue are $25,000 or less, or a loss in issue is $50,000 or less, and you elect it.
- If the amounts are higher, the Court orders the general procedure unless you elect to limit the appeal to those amounts.
- Staying informal brings relaxed evidence rules and quicker judgments, but the judgment is not a precedent and appeal rights are narrow.
You have filed a notice of objection, the CRA has confirmed or reassessed, and now you are thinking about the Tax Court of Canada. The informal procedure sounds attractive, since it is meant to be simpler. Then you notice that the tax and penalties in dispute add up to more than $25,000.
This article explains what the limit actually counts, what happens when you are over it, the option of capping your appeal, and a separate rule for disputes about interest only. It also weighs what you gain and give up by staying informal. It is general information, not advice on your own file.
This article covers Canadian federal tax law, which applies in every province.
What the informal procedure limit is
Under the Tax Court of Canada Act, the informal procedure applies where the aggregate of all amounts in issue is $25,000 or less, or where the loss in issue under section 152(1.1) of the Income Tax Act is $50,000 or less, and you elect to use it. The CRA describes this as federal tax and penalties of $25,000 or less per assessment, or a loss of $50,000 or less per determination.
Two points are worth noticing. First, the informal procedure is something you choose, not something that happens automatically. Second, the test is about the amounts actually in dispute, not the total of the return or the full balance owing. How those amounts are counted in a particular case can be technical, so it is worth confirming with a lawyer or accountant.
What happens if the amounts are over the limit
If the amounts in issue are more than $25,000, or the loss is more than $50,000, the Court orders that the general procedure apply. That is the more formal route, with pleadings, lists of documents and examinations for discovery.
There is an exception. You can elect to limit your appeal to those amounts. If you do, the judgment is deemed to state that the amounts will not be reduced by more than $25,000, or the loss increased by more than $50,000.
In plain terms, capping the appeal lets you keep the case in the informal procedure, but it also puts a ceiling on what you can win. If the real dispute is much larger than the cap, you would be giving up the part above it. That is a trade-off to think through before you elect.
Appeals about interest only
A different rule applies where the only subject-matter of the appeal is interest assessed under the Income Tax Act. The informal procedure is available for that kind of appeal. The CRA lists "only interest in dispute" as eligible.
There is a catch. In an interest-only informal appeal, the Attorney General may apply to move the case to the general procedure, and the Court must grant the request if the interest in issue is more than $25,000. Interest that builds up after the notice of assessment is left out of that calculation.
Separately, a refusal of a request to cancel or waive interest or penalties is a different kind of decision. The Minister's power to do so is an administrative relief decision, not a Tax Court appeal. If a relief request is refused, the CRA offers a second administrative review, and a person who thinks the CRA was not fair and reasonable can apply to the Federal Court for judicial review within 30 calendar days of receiving the decision.
The trade-offs of staying informal
| Feature | Informal procedure | What to weigh |
|---|---|---|
| Evidence and representation | The Court is not bound by technical rules of evidence, and you may appear in person or use counsel or an agent | Easier to take part, but you still need to present your facts clearly |
| Timing of judgment | Judgment is due within ninety days after the hearing concludes, except in exceptional circumstances | Faster answer once the hearing is over |
| Costs | The Court may award costs to you if the judgment reduces the amounts in issue, and you will not pay the Minister's costs unless you unduly delay | Limited cost exposure |
| Precedent | An informal judgment is not treated as a precedent for any other case | Little value if you want a ruling that guides future years |
| Further appeal | Appeal to the Federal Court of Appeal only on limited grounds, such as lack of jurisdiction, breach of procedural fairness or an error of law | Much narrower route if you lose |
The process itself is lighter. The notice of appeal sets out reasons and facts in general terms, and the Minister files a reply within sixty days after the notice is transmitted. The Court fixes the hearing date and gives reasons, though written reasons are required only where the Court considers it advisable.
If the Minister appeals an informal judgment, your reasonable and proper costs of that appeal are paid by the Crown.
What to do next
Start with the clock. A Tax Court appeal generally has to be received by the Court within 90 days of the date on the notice of confirmation or reassessment. If the Minister has not given a decision, you may appeal once 90 days have passed after service of your notice of objection.
- Find the notice of confirmation or reassessment and note its date.
- List each amount in dispute: tax, penalties, interest, and any loss, by assessment.
- Decide whether the dispute is mainly about this year or about a point that may recur in other years.
- Ask whether capping the appeal would cost you part of what you are claiming.
- Gather the documents and facts that support your position.
- Speak with a lawyer or accountant before electing, since the choice affects costs, procedure and appeal rights.
If you miss the deadline, the Tax Court can be asked for an extension, but the application must be made within one year after the 90-day period expires and you must meet several requirements. It is far safer to act within the 90 days.
Frequently asked questions
Can I use the informal procedure if more than $25,000 is in dispute?
Not automatically. If the amounts exceed $25,000, the Court orders the general procedure unless you elect to limit your appeal to those amounts. If you elect, the judgment is deemed to state that the amounts will not be reduced by more than $25,000.
Is the limit different if I am disputing a loss?
Yes. The informal procedure applies where the loss in issue under section 152(1.1) of the Income Tax Act is $50,000 or less. If the loss is higher, you can elect to limit the appeal so the loss is not increased by more than $50,000.
What if my appeal is only about interest?
An appeal where the only subject-matter is interest assessed under the Income Tax Act can use the informal procedure. The Attorney General can apply to move it to the general procedure, and the Court must grant that if the interest in issue is over $25,000, not counting interest that accrues after the notice of assessment.
Can I appeal if I lose an informal procedure case?
Only on limited grounds, such as lack of jurisdiction, breach of procedural fairness or an error of law. A Federal Court of Appeal notice of appeal generally must be filed within 30 days, not counting days in July and August, after the judgment.
Sources
- Income Tax Act s. 169 — Justice Laws (federal)
- CRA RC4443 Appealing income tax assessments to the Tax Court of Canada — canada.ca
- CRA File an appeal to the Court - Income tax or GST/HST — canada.ca
- Income Tax Act s. 167 — Justice Laws (federal)
- Tax Court of Canada Act s. 18 — Justice Laws (federal)
- Tax Court of Canada Act ss. 18.12-18.13 — Justice Laws (federal)
- Tax Court of Canada Rules (General Procedure) — Justice Laws (federal)
- Federal Courts Act s. 27 — Justice Laws (federal)
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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