How to Withdraw or Discontinue a Tax Court of Canada Appeal

Not every appeal needs to run to judgment. The cost, time or stress may outweigh what is at stake, or the CRA may have offered a fair outcome. If you are thinking about stopping your Tax Court of Canada appeal, you want to know what that really means for the assessment and for costs.

The exact steps and paperwork to discontinue depend on the Court's rules and your procedure, and should be confirmed before you act. This article explains the decisions around that step so you can ask the right questions.

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

Withdrawing, discontinuing and settling are not the same

In everyday language people use withdraw and discontinue to mean ending the appeal yourself. Settling is a negotiated end. With the taxpayer's written consent, the Minister may at any time reassess to dispose of an appeal, which is the basis for settling a filed appeal.

What stopping an appeal means for the assessment you were challenging depends on your situation, so it is worth confirming with a lawyer or accountant. Before you do, confirm in writing with a lawyer or accountant what happens to the assessment, the balance owing and any interest.

Why timing and deadlines matter

Think carefully before ending an appeal, because starting again may not be possible. For income tax, the appeal deadline is 90 days from the day the notice of confirmation or reassessment was sent. If it is missed, you may apply for an extension, but no order can be made unless the application is made within one year after the 90-day period expires.

You must also show, among other things, that you had a bona fide intention to appeal or were unable to act, that the application was made as soon as circumstances permitted, and that there are reasonable grounds for the appeal. Whether a discontinued appeal can be revived depends on the facts, so ask first.

How costs may be affected

In the informal procedure, the Court may award costs to the appellant if the judgment reduces the aggregate of amounts in issue, and it may consider written settlement offers. The CRA says the taxpayer will not pay the Minister's costs unless the taxpayer unduly delays the appeal.

In the general procedure, the Court can order either party to pay some of the other party's legal costs. It considers factors including the result, amounts in issue, the complexity of the issues, written settlement offers and conduct that lengthened the proceeding.

A written offer can matter. It can increase recovery to substantial indemnity costs (80% of solicitor-and-client costs) after the offer date if the judgment is as favourable. The offer must be served at least 30 days after pleadings close and at least 90 days before the hearing, and not withdrawn. How costs apply when an appeal is discontinued should be confirmed with a lawyer.

Other routes if the appeal is not the right tool

• Penalty or interest relief: the Minister may waive or cancel penalties or interest on or before the day that is ten calendar years after the end of the taxation year, which is an administrative decision rather than a Tax Court appeal.
• If a relief request is refused, the CRA offers a second administrative review.
• A taxpayer who thinks the CRA was not fair and reasonable can apply to the Federal Court for judicial review within 30 days after the decision is first communicated, and a Federal Court judge may allow a further period.
• If you lose after judgment, an appeal to the Federal Court of Appeal generally must be filed within 30 days, not counting days in July and August. Informal procedure judgments can be appealed only on limited grounds, such as lack of jurisdiction, breach of procedural fairness or an error of law.

What to do next

• Write down why you want to stop and what outcome you expect.
• Get your assessment, reply and all correspondence in one place.
• Ask whether a settlement through reassessment is possible before you end the appeal.
• Check how stopping affects the tax, penalties, interest and costs.
• Note the original appeal and extension deadlines.
• Get advice from a lawyer or accountant before you sign or file anything.

Frequently asked questions