New from the CRA: IC-100 ó GST/HST Compliance Refund Holds

New on the Canada Revenue Agency (CRA) website is the C-100. This circular explains how a corporation, which is insolvent, can get its GST/HST refunds without filing a corporate income tax return. The three-part circular explains the legislative framework, the requirements for having the corporate tax return waived and the process for redress, if necessary.

Legislation: Subsections 229(2), 230(2), and 296(7) and section 77 of the Excise Tax Act provide that the CRA cannot release a refund or rebate to a taxpayer if that taxpayer has not filed all required tax returns. But the Income Tax Act does give the CRA some leeway in administering the tax system fairly and reasonably. That means, in some circumstances, an insolvent company can apply to have the requirement to file a corporate income tax return waived.

Guidelines: If the CRA is satisfied that an insolvency practitioner cannot file a corporate income tax return because of that taxpayer's circumstances, then the CRA may provide relief from the requirement to file. Subsection 220(2.1) empowers the CRA to decide whether to waive the requirement to file a prescribed form, receipt or other document required under the Act.

The IC-100 gives the following example of when a request for a waiver will be approved: "Generally, a request for a waiver will be approved when, because of circumstances beyond the insolvency practitioner's control, insufficient books and records are available to prepare the corporate income tax return(s) that are required from the taxpayer.î

The CRA stresses that this route is not to be used by insolvency practitioners as a way to avoid their compliance responsibilities.

To make a request, an insolvency practitioner must fill out Form RC342, Request by an Insolvency Practitioner for a Waiver of the Requirement to File a T2 Corporation Income Tax Return, and send it to the Regional Intake Centre for Insolvency (RICI) serving his or her area. The information required by the CRA to make a successful application can be found on this form, as can the addresses of RICI offices.

The CRA will consider the taxpayer's history of compliance, the culpability of the taxpayer for the situation in which it now finds itself, and any other relevant criteria.

Redress: If the CRA denies your request, your only redress will be proving the CRA did not consider the true merits of the application and that there was an element of prejudice or bias. This is a serious assertion; thus, a second review is rare. In the event that it does occur, however, CRA officials who were not involved in the initial application will review the subsequent application for relief.

Insolvency practitioners can also apply for judicial review of a CRA decision to the Federal Court pursuant to Section 18.1 of the Federal Courts Act. This application must be made within 30 days of the date the decision was first received by the insolvency practitioner and must include the completed Form 301, Notice of Application.

It is imperative to note, however, that judicial review is a last resort for administrative decisions. Therefore, courts are reluctant to engage in their own review unless the administrative course has been exhausted, that is, insolvency practitioners have asked for a second review by the CRA. Upon review by the court, the court will not substitute its decision, but will refer the matter back to the CRA for reconsideration.