Tax Court Informal Procedure in Canada: Who Qualifies

If you have objected to a CRA assessment and the CRA has not changed its position, you may be thinking about the Tax Court of Canada. The Court has two tracks, and the one you choose affects cost, paperwork and how much help you may want.

The informal procedure is meant to be more accessible for smaller disputes. This article explains who qualifies, what happens if the amounts are too high, how the process runs, and the trade-offs against the general procedure.

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

Who qualifies for the informal procedure

Under section 18 of the Tax Court of Canada Act, the informal procedure applies where the total of all amounts in issue is $25,000 or less, or where the loss in issue 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.

It also applies where the only subject-matter of the appeal is interest assessed under the Income Tax Act. The CRA lists "only interest in dispute" as eligible.

• Federal tax and penalties of $25,000 or less per assessment.
• A loss of $50,000 or less per determination.
• A dispute about interest only.

What happens if the amounts are over the limit

If the amounts in issue exceed $25,000, or the loss exceeds $50,000, the Court orders the general procedure to apply. The exception is that 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.

Interest-only appeals have their own rule. The Attorney General may apply to move the case to the general procedure, and the Court must grant it if the interest in issue exceeds $25,000. Interest that accrues after the notice of assessment is left out of that calculation.

Capping an appeal means giving up any result beyond the cap, so it is worth thinking through with a lawyer or accountant first.

How the informal procedure runs

• You may appear in person or be represented by counsel or an agent.
• The Court is not bound by legal or technical rules of evidence.
• Your notice of appeal sets out reasons and facts in general terms.
• The Minister files a reply within sixty days after the notice of appeal is transmitted.
• The Court fixes the hearing date.
• Judgment must be rendered no later than ninety days after the hearing concludes, except in exceptional circumstances.

The Court gives reasons, but written reasons are required only where the Court considers it advisable.

Trade-offs compared with the general procedure

Under the informal procedure, the CRA says you will not pay the Minister's costs unless you unduly delay the appeal. If the Minister appeals an informal judgment, your reasonable and proper costs of that appeal are paid by the Crown. In the general procedure, the Court weighs factors such as the result, the amounts in issue, the complexity of the issues, settlement offers and conduct that lengthened the case.

There are costs in the general procedure to be aware of. A written settlement offer can raise your recovery to substantial indemnity costs (80% of solicitor-and-client costs) if the judgment is as favourable and the offer was timely and not withdrawn.

Two limits matter for informal appeals. An informal judgment is not treated as a precedent for any other case. And it can be appealed to the Federal Court of Appeal only on limited grounds, such as lack of jurisdiction, breach of procedural fairness or an error of law.

Deadlines and what to do next

Whichever procedure you choose, you can appeal to the Tax Court after serving a notice of objection once the Minister has confirmed the assessment or reassessed. The Court must receive your notice of appeal within 90 days of the date on the notice of confirmation or reassessment. If the Minister has not notified you of a decision, you may appeal once 90 days have passed after service of your notice of objection.

If you miss the deadline, you may apply to the Tax Court for an extension, but the application must be made within one year after the 90-day period expires.

• Find the date on your notice of confirmation or reassessment and count 90 days.
• Add up all the amounts in issue and compare the total with the $25,000 limit, or the $50,000 limit if a loss is in issue, and check whether interest is the only issue.
• Decide whether you will act yourself, or use an agent or lawyer.
• If the amounts are over the limit, ask about capping the appeal and what you would give up.
• Get advice from a lawyer or accountant before filing.

Frequently asked questions