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The Right to Appeal to the Tax Court of Canada or Federal Court of Canada

If you disagree with a decision of the CRA or disagree with the tax the CRA claims you owe, many decisions can be appealed to the Tax Court of Canada or the Federal Court.

Our tax litigation lawyers represent you in the Tax Court of Canada, a specialized court in Canada that has exclusive jurisdiction to handle disputes over the correctness of tax assessments. If you believe that the CRA has acted improperly in reaching a decision, or made a discretionary decision unreasonably, you may seek redress through the Federal Court of Canada, a court that supervises a number of Canadian administrative bodies, including the CRA.

Appeals to the Tax Court of Canada

If you disagree with a tax assessment, after filing a notice of objection, you have a right to appeal to the Tax Court of Canada. Tax Court appeals function similarly to civil lawsuits against the government, in which a taxpayer sues to demonstrate that a tax assessment is incorrect.

The Tax Court’s jurisdiction in income tax and HST matters is almost entirely over the correctness of assessments (as well as some related issues, such as requests for extensions). Prior to reaching the Tax Court, the CRA must first assess you. After this, you must file a notice of objection. Tax appeals typically start with the individual filing a return, following which the CRA audits the period, issues a notice of reassessment, and the taxpayer files an objection.

Once the objection has been filed, the taxpayer can either wait for the matter to be adjudicated by the “appeals branch”, a division of the CRA which primarily handles objections, or can appeal directly to court without waiting for a decision from appeals after waiting 90 days (for income tax) or 180 days (for HST). Typically, it makes sense to attempt to resolve the matter through the appeals branch first—many issues can be resolved through a faster, less costly objection.

Once the CRA’s appeals branch completes their review, if they do not concede all issues, they will issue a Notice of Confirmation (if they intend to make no changes) or issue an additional reassessment. The Taxpayer then had 90 days to appeal to the Tax Court of Canada. If you miss this deadline, you may file an Application for an Extension of Time to allow an additional 12 months to file the Tax Court Appeal.

The Tax Court of Canada has two streams available to taxpayers: the informal and the general procedure. The informal procedure is intended to handle lower amounts in dispute (the amount in dispute for each year is $25,000 or less for income tax issues), which is a process similar to the small claims court. The general procedure handles appeals above this threshold, and has a less relaxed procedure an formal rules of evidence.

General Procedure appeals involve the exchange of documents between parties, as well as agreed-to timetables. As with civil suits, parties have opportunities to exchange questions, although this is often done in writing in the tax context, and unlike in civil suits, parties in most tax appeals do not have a general obligation to disclose information that is relevant even if harmful to their case.

In both procedures, there is opportunity to settle the matter with the Department of Justice, who are the CRA’s lawyers, before the matter proceeds to trial.

Judicial Review by the Federal Court of Canada

Most issues that taxpayers care about are the correctness of assessments—how much they made, and how much tax they need to pay. However, some other issues—particularly discretionary decisions relating to taxpayer relief requests, but also procedural issues and disputes over refunds—are properly before the federal court.

Taxpayers should be quite cautious before proceeding with an application for judicial review, as many issues are properly before the Tax Court of Canada. For example, most disputes with auditors, or questions about the procedure taken in the course of an audit or objection, are correctly addressed through an appeal to the Tax Court. Applications for judicial review are also very technical, and the taxpayer does not have an opportunity to “re-litigate” an issue an have their case heard fresh. However, it is the only way to challenge final decisions on taxpayer relief requests.

The exercise of many collections powers, such as holds on bank accounts, while formally subject to judicial review, is extraordinarily difficult to challenge, particularly in a timely way. However, the CRA often makes applications in Federal Court, as CRA must make an application in a court to obtain, for example, a writ of seizure and sale or a charge/lien on property.

The Federal Court system also includes the Federal Court of Appeal, which hears subsequent appeals from both the Tax Court and the Federal Court.

FAQ’s:

If I disagree with the conclusions of the CRA on the notice of assessment, what should I do?

The first thing to do is to file a Notice of Objection. A Notice of Objection is a kind of internal appeal that can be filed with the CRA to dispute the amount of tax levied in a Notice of Assessment or Reassessment.

If you disagree with the findings of the CRA to your Notice of Objection, or feel that your case may not be well suited to adjudication through the CRA, you can file an appeal to the Tax Court to continue contesting it.

What is the Tax Court of Canada?

The Tax Court of Canada is a specialized court in Canada that has exclusive jurisdiction over the correctness of federal tax assessment. The Tax Court is the proper venue for addressing most decisions of the CRA that taxpayers care to contest.

The Tax Court of Canada has the jurisdiction to hear a wide variety of appeals under several statutes such as the Excise Tax Act, the Employment Insurance Act, the Excise Act and the Customs Act. For most Canadians, the jurisdiction that is most relevant is the Tax Court’s jurisdiction to hear tax appeals arising from disputes with the Canadian tax department under the Income Tax Act.

What powers does the Tax Court of Canada have in terms of tax appeals?

The Tax Court has only three powers granted to it with respect to appeals of assessments and reassessments:

  • The Tax Court of Canada judge may confirm the assessment or reassessment issued by the CRA;
  • The Canada Tax Court judge can vacate the assessment, which means that the taxpayer reverts to the prior assessment;
  • The Tax judge may also direct the Minister to reassess the taxpayer in accordance with his or her instructions, based on findings from trial or through a settlement offer.

Unfortunately, it does not have jurisdiction to direct the CRA to waive interest or cancel penalties otherwise than by finding them to be inapplicable at law. It cannot direct that assessments be cancelled or adjusted on compassionate or “equitable” grounds”.

How long do I have to wait after receiving a Notice of Assessment before I can file an appeal with the Tax Court of Canada?

A Notice of Appeal to the Tax Court of Canada must be filed within 90 days from the date of a notice of reassessment or notice of confirmation issues following a notice of objection.  You can also appeal directly after an objection has been filed.

If you miss the 90-day deadline, there are mechanisms to file an Application for an Extension of Time to allow an additional 12 months to file the Tax Court Appeal. In order to be successful with the request for an extension of time you must be able to demonstrate the following:

  • That within the appeal period:
    • You could not appeal or have someone else appeal for your; or
    • You intended to appeal;
  • That it would be fair to grant your application;
  • That you applied as soon as you could; and
  • That you have reasonable grounds for appealing.

The Court and Department of Justice are typically willing to grant some flexibility to taxpayers hoping to appeal a tax assessment who are within the additional one-year, although there is not much that can be done after that point.

Why you Need a Tax Litigation Lawyer

Whether you disagree with a decision of the CRA regarding the amount of tax claimed you owe, or are considering challenging another decision of the CRA, our tax litigation lawyers can pursue an appeal an appeal in the Tax Court of Canada or a Judicial Review application in the Federal Court to hold the CRA accountable.

With years of experience in corporate law and tax law, our tax litigation lawyers have the knowledge and tools to fight for your interests against the Department of Justice in either court.

For more information on appeals within the Tax Court of Canadaclick here. For more information on application in the Federal Court of Canada, click here.

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