Rebuilding a Dead Man's Receipts to Save an HST Refund

The situation

Marek spent thirty years as a self-employed millwright in London, taking on contract work installing and repairing industrial machinery for manufacturers around the region. He registered for HST early in his business and, like most tradespeople who buy their own tools, materials and subcontractor labour, claimed input tax credits on the HST he paid out on those business expenses. An input tax credit is the mechanism that lets a GST/HST registrant recover the tax it pays on its own purchases, so that HST is ultimately borne by the final consumer rather than by the business passing it along the chain.

Marek died in his early sixties, leaving his estate to be settled by his nephew Marco, an insurance adjuster, and Marco's brother Tomasz, who took on the role of co-executor. Neither had run a business themselves, let alone closed one out. Marek's paperwork reflected that: invoices stuffed into a filing cabinet in no particular order, some paid by cheque, some by e-transfer, a few in cash, and a shoebox of gas station and hardware store receipts that had mostly gone illegible. Marco filed Marek's final personal tax return and the estate's HST returns for the year of death using the numbers from Marek's own bookkeeping software, expecting that to be the end of it.

The audit

About eight months after the final HST return was filed, the estate received a letter from the Canada Revenue Agency notifying it that Marek's HST filings for the two years before his death, plus the final period, had been selected for an audit. This is not unusual: sole proprietors with fluctuating input tax credit claims, and estates winding down a registrant's affairs, both attract a higher rate of review than ongoing corporate filers.

The auditor's request was broad: source documents for every input tax credit claimed over roughly two and a half years, matched to specific invoices showing the supplier's name, an HST registration number, a description of what was purchased, and the tax charged. Marco supplied what he had. It was not enough. Several months later, the auditor issued a proposal letter denying input tax credits on a large share of Marek's claimed subcontractor and materials expenses — invoices that existed in Marek's bookkeeping records as line items, but for which the underlying paper had been lost, was illegible, or had never named the supplier clearly enough to satisfy the documentary requirements the Excise Tax Act sets out for claiming this kind of credit. The proposed reassessment put roughly $90,000 of input tax credits and associated interest in dispute — money the estate had already accounted for as spent, not owed.

Marco had a limited window to respond to the proposal before it hardened into a formal reassessment. After that point, disputing it would mean filing a notice of objection, a formal written disagreement with an assessment that starts an internal CRA appeals process, and a strict deadline applies to filing one. He came to us with the shoebox, the bookkeeping file, and very little confidence that any of it could be rescued.

What we did

1. Triaged the claims by documentation gap, not by dollar value. Rather than trying to defend every disputed line at once, we sorted the denied credits into three categories: claims with a legible invoice that simply hadn't been sent to the auditor, claims where the invoice existed but was missing a supplier's HST number, and claims with no surviving paper at all. Each category needed a different fix, and the split let us close the easiest ones first while working on the harder ones.
2. Rebuilt the paper trail from Marek's bank and credit card statements. Every payment leaves a trace even when the receipt doesn't survive. We worked with Marco to pull two and a half years of statements and match each disputed expense to a specific payment, by date and amount, to a specific supplier. On its own, a bank record does not prove HST was charged or how much — but it corroborates that a purchase happened, from whom, and for roughly how much, which matters a great deal once the harder evidence is assembled around it.
3. Went back to Marek's suppliers for duplicate invoices. Most of Marek's regular suppliers — a fastener wholesaler, a welding equipment rental company, two subcontractors he used repeatedly — kept their own records and were willing to reissue copies once we explained the estate needed them for a CRA matter. This recovered a substantial share of the credits in the second category outright, since a reissued invoice with a valid HST registration number satisfies the requirement even though the original was lost.
4. Prepared a sworn statutory declaration for the remainder. For a smaller number of claims where no supplier could be traced and no bank record was specific enough, we prepared a detailed statutory declaration from Marco describing what he knew of Marek's business practices, cross-referenced against the surviving bookkeeping entries and the pattern of documentation that had been recovered elsewhere. A declaration is not a substitute for proper invoices, and we were candid with Marco that CRA is not obliged to accept it — but paired with a consistent, well-corroborated pattern across the rest of the file, it gives an auditor a reasonable basis to exercise judgment in the taxpayer's favour on the residual claims.
5. Responded within the window and negotiated directly with the auditor. We filed the reconstructed documentation as a response to the proposal letter before the deadline, rather than waiting for a formal reassessment and objection process that would have taken considerably longer. We also asked to speak with the auditor directly, walked through the reconstruction methodology category by category, and addressed follow-up questions about specific invoices in real time rather than by further written correspondence, which shortened the review meaningfully.

The outcome

The auditor accepted the reissued supplier invoices in full and accepted the bank-corroborated claims with only minor adjustments where an amount didn't reconcile exactly. On the smaller residual category supported by the statutory declaration, the auditor allowed the majority of what remained, disallowing a modest portion where the pattern of corroboration was thinnest. In total, the estate recovered roughly $78,000 of the $90,000 originally in dispute, with the balance standing as a final, reduced reassessment that the estate paid from remaining assets before final distribution to the beneficiaries.

The process took about five months from the proposal letter to the final decision, longer than Marco had hoped but well within the normal range for a document-heavy small business audit. Because the estate responded to the proposal directly rather than letting it convert to a formal reassessment, it avoided the additional months a notice of objection and appeals review would have added, and avoided the risk that comes with disputing an assessment after the fact rather than shaping it before it is finalized.

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