Recent Developments

New Relief May Now be Available

On June 2, 2011, the Federal Court of Appeal released it decision in Bozzer. In that case, the taxpayer sought to apply for relief under the taxpayer relief provisions for a tax liability that arose in the 1989 and 1990 taxation years. The CRA denied his request for relief on the basis that the Income Tax Act did not provide them with the ability to provide relief for tax liabilities that arose in taxation years more than 10 years before the year the request was made. The Federal Court of Canada upheld CRA’s decision. However, the Federal Court of Appeal disagreed with CRA and the Federal Court and ruled in favour of the taxpayer.

According to the Federal Court of Appeal, CRA’s interpretation of the statutory authority that allows them to provide taxpayer relief was incorrect. This meant that the taxpayer could seek relief for any interest or penalties that accrued in the 10 years prior to the year in which the request for relief was made.

This decision is a major victory for taxpayers as it substantially expands the potential application of the taxpayer relief provisions of the Income Tax Act and Excise Tax Act. However, before taxpayers make applications for relief for old tax years they should understand that this decision may not make the impact we hope. I expect that this decision will be appealed by the Minister of National Revenue to the Supreme Court of Canada. If this occurs, this will likely mean that any applications made for “old” tax years will be put on hold pending the resolution of any application for leave and, if leave is granted, the actual case. Further, if the Minister of National Revenue is unsuccessful in the legal system, they can always ask the Ministry of Finance to amend the provisions of the Income Tax Act and the Excise Tax Act to return the taxpayer relief provisions to the previous interpretation.