When Can the CRA Reassess a Statute Barred GST HST Return
Under the Excise Tax Act (ETA) , the Canada Revenue Agency (CRA) generally has four years from the original assessment date to issue a reassessment for GST/HST purposes. But what happens when the CRA tries to reassess a period you assumed was closed?
This issue often arises during audits of older tax periods and the CRA must meet a higher legal threshold to justify going beyond the normal limitation period.
Reassessments Beyond Four Years: The Legal Test
Subsection 298(4) of the ETA allows the CRA to issue a reassessment beyond the standard period, but only if one of the following conditions is met:
- There was a misrepresentation due to neglect, carelessness, or wilful default;
- The return involved fraud; or
- The taxpayer waived the normal reassessment period.
This rule strikes a balance: taxpayers are entitled to finality after a reasonable time, but the CRA can still act in cases of serious reporting failures. If you’ve received a reassessment after the four-year window, a Toronto tax lawyer can assess whether the CRA has met the necessary threshold.
The CRA Has the Burden of Proof
In a normal audit, the CRA can rely on factual assumptions and shift the burden of proof to the taxpayer. But where the CRA reassesses a statute barred return under subsection 298(4), the burden shifts back to the CRA.
The Federal Court of Appeal in Boucher v Canada made it clear: it’s not enough for the CRA to point to an error. They must also demonstrate that the misstatement resulted from neglect or carelessness.
The same principle was applied in MNR v Bisson where the Court noted that a reporting error is not the same as a misrepresentation unless negligence can be shown.
What Counts as Negligence or Carelessness?
In Venne v The Queen the Federal Court of Appeal clarified the standard. To prove negligence, the CRA must show the taxpayer failed to exercise reasonable care when preparing the return.
Key principles:
- Negligence = failure to act prudently.
- Carelessness = a higher degree of fault, approaching recklessness.
- Good faith mistakes are not negligence.
- Taxpayers are judged as “wise and prudent persons,” not tax experts.
In other words, the courts expect reasonable care, not perfection.
Misinterpretation of the Law Is Not Enough
If you filed based on a genuine understanding of the law, even if your interpretation was later found to be wrong, this generally won’t meet the threshold under subsection 298(4).
Courts have repeatedly held that a good faith interpretation of tax law does not amount to carelessness. CRA must do more than identify an incorrect position; it must show why that position was taken negligently.
How Kirshen Tax Law Can Help
At Kirshen Tax Law, we represent taxpayers in disputes involving GST/HST reassessments, including cases where the CRA tries to reopen statute barred periods. We can help determine whether the CRA has met its burden under subsection 298(4) and prepare a strong legal response to challenge improper reassessments.
Call us for a free consultation with an experienced Toronto tax lawyer who knows how to challenge statute barred GST/HST reassessments with precision and legal authority.
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.