CRA Corporate GST/HST Audits: What the CRA Can and Cannot Do
When the CRA audits a corporation for GST/HST, its powers are broader than most business owners expect. What begins as a request for corporate documentation can quickly expand into demands for personal bank records, and shareholder documents.
The CRA’s authority comes from section 288 of the Excise Tax Act. It allows auditors to inspect records, enter business premises at reasonable times, conduct interviews, and require reasonable assistance to verify GST/HST compliance.
Those powers are significant. But they are not unlimited. Requests must be relevant to GST/HST administration and enforcement.
Document Requests in Corporate GST/HST Audits
In a corporate GST/HST audit, the CRA can review:
- GST/HST returns and working papers;
- Sales invoices;
- Purchase invoices supporting input tax credits;
- General ledgers and reconciliations; and
- Corporate bank statements.
Auditors often reconcile deposits to reported taxable supplies and scrutinize input tax credit claims. If records are incomplete, the CRA will often begin demanding personal information and documentation.
Corporations are required to maintain adequate GST/HST records. Poor bookkeeping increases audit risk.
Personal and Shareholder Records
Section 288 permits the CRA to inspect documents that may be relevant to the obligations of “that or any other person.” In practice, this is used to justify requests for shareholder or director banking records in GST/HST audits.
These requests are typically tied to concerns about unreported taxable supplies, diverted revenue, or commingling of funds. However, blanket personal document demands at the outset of a routine GST/HST audit may be premature.
A Toronto tax lawyer will often recommend a structured response: producing corporate GST/HST records first and requiring the CRA to identify specific concerns before expanding the scope of the audit.
Meetings and Compelled Assistance
The CRA can require reasonable assistance during a GST/HST audit. This can include compelled meetings with directors, shareholders, or bookkeepers.
While attendance may be required, you are entitled to representation and to hold the meeting virtually. A Toronto tax lawyer can assist with managing questioning and keeping the audit focused on GST/HST issues.
Kirshen Tax Law Can Help
Many taxpayers do not want to provide personal information during a GST/HST audit. While this is reasonable, outright refusal is rarely effective. The CRA can issue formal requirements and seek compliance orders through the Federal Court. The better approach is controlled cooperation: producing relevant GST/HST records, sequencing production properly, and narrowing overbroad requests.
Understanding CRA corporate GST/HST audit powers allows corporations to remain compliant without unnecessarily expanding exposure. If your corporation is under a GST/HST audit, contact Kirshen Tax Law to schedule a free consultation with a Toronto tax lawyer.
Jeff Kirshen BA, JD (CA), JD (US)
Tax Lawyer | Founder, Kirshen Tax Law
Disclaimer
The content on this website, including articles and blog posts, is provided for general informational purposes only. It reflects the laws and regulations as of the date of publication, which may have since changed. This content is not intended to serve as legal advice and should not be relied upon as such. Tax laws and situations can be complex and unique to each individual. The information provided may not apply to your specific circumstances. For personalized advice regarding your tax or legal matters, we recommend consulting a qualified lawyer.