Can the Tax Court of Canada Review a Refused CRA Relief Request?

You asked the CRA to cancel penalties or interest, and the answer was no. It is natural to assume the Tax Court of Canada is the next stop, since that is where many tax disputes end up. For this type of request, that is generally not the right forum.

The right path depends on what exactly you are challenging: the refusal of relief, or the assessment of interest itself. Each has its own route and its own clock, and some of those clocks are short. This article explains the difference so you can pick the right forum in time.

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

Why a refused relief request is not a Tax Court appeal

The Minister may waive or cancel penalties or interest under section 220(3.1) of the Income Tax Act on or before the day that is ten calendar years after the end of the taxation year. That is a CRA administrative relief decision, not a Tax Court appeal.

In plain terms, taxpayer relief is a discretion the Minister may exercise. It is different from arguing that an assessment is wrong. A Tax Court appeal asks the Court to vacate or vary an assessment after the Minister has confirmed it or reassessed. A relief request asks the CRA to forgive an amount that may be correctly calculated.

The ten-year limit matters because it caps how far back you can ask. If the year you are dealing with is close to that limit, check the dates early rather than waiting.

What you can do after a refusal

If a taxpayer relief request is refused, the CRA offers a second administrative review. This is a further look inside the CRA, so it is worth considering if you have new information or think something was missed.

If you think the CRA was not fair and reasonable, you can apply to the Federal Court for judicial review within 30 calendar days of receiving the decision. The Federal Courts Act says an application for judicial review must be made within 30 days after the decision is first communicated, and a Federal Court judge may allow a further period.

• Federal Court judicial review is the route for a taxpayer who thinks the CRA was not fair and reasonable in refusing relief; what it can decide in your case is worth confirming with a lawyer.
• The 30-day clock runs from when the decision is first communicated, so keep the date you received it.
• Extra time is possible, but it is for a judge to allow and should not be assumed.

What the Tax Court can do about interest

The Tax Court is not closed to interest disputes. Under the informal procedure, it can hear an appeal where the only subject-matter is interest assessed under the Income Tax Act. This is about the assessment of interest, which is a different question from whether the CRA should forgive it as a matter of discretion.

The informal procedure is also open where the amounts in issue are $25,000 or less, or the loss in issue is $50,000 or less, and you elect it. You may appear in person or be represented by counsel or an agent, and the Court is not bound by technical rules of evidence.

There is an exception. In an interest-only informal appeal, 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 accrued after the notice of assessment is left out of that calculation.

An informal procedure judgment is not treated as a precedent for any other case.

Comparing the two routes

Choosing the right forum before time runs out

Start by identifying what you are really disputing. If you say the interest was calculated wrongly or should not have been assessed, that points toward an objection and possibly the Tax Court. If the interest is correct but you want it forgiven because of your circumstances, that is a relief request, and a refusal goes down the administrative and Federal Court path.

• Write down the date on every CRA letter: the assessment, any confirmation or reassessment, and any relief decision.
• Check the objection deadline. For most individuals it is the later of one year after the filing-due date or 90 days after the notice of assessment was sent.
• Count 90 days from a notice of confirmation or reassessment for a Tax Court appeal.
• Count 30 days from the relief decision for Federal Court review.
• Ask whether a second administrative review makes sense, but do not let it use up your court deadline.
• Speak with a lawyer or accountant promptly, since the two routes can run on different clocks.

If a deadline has already passed, there may still be options. A Tax Court appeal can be extended only if the application is made within one year after the 90-day period expires, and you must meet the statutory tests. Whether they apply to you depends on the facts, so get advice quickly.

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