Is My GST/HST Reassessment Statute Barred?
If the Canada Revenue Agency (CRA) audits a taxpayer’s GST/HST returns, and determines that the previous assessment was incorrect, they are able to change the assessment by issuing a notice of reassessment. However, there are certain time limits that apply that the CRA must meet in order to issue those notices of reassessment. If the CRA is out of time to issue a notice of reassessment, the correct term to use would be that issuing the notice of reassessment is statute barred. This blog will discuss those timelines as they relate to GST/HST assessments and reassessments.
What Does Statute Barred Mean?
Statute barred means that the law does not allow an action to be taken. In the context of GST/HST notices of reassessment, statute barred means that the CRA is out of time to change a taxpayer’s previous assessment by issuing a notice of reassessment.
According to Section 298 of the Excise Tax Act (ETA), the CRA has four years from the date of a GST/HST notice of assessment to issue a notice of reassessment. This means that if a taxpayer files a GST/HST return on March 1, 2022, the CRA has until February 28, 2026 to issue a notice of reassessment. If they miss that deadline, then the issuance of a notice of reassessment becomes statute barred. That being said, the ETA does provide for exemptions to this four year rule.
When Does the Four Year Rule Not Apply?
According to Subsection 298(4)(a) through (c), the CRA can issue a notice of reassessment after the expiration of the four year time limit if the taxpayer has done any of the following:
- Made a misrepresentation that is based on that person being neglectful, careless, or wilfully defaulted on their responsibilities;
- Committed fraud; or
- Filed a waiver specifically allowing the CRA to issue the notice of reassessment after the four year limit has passed.
Since the CRA is given the ability to issue notices of reassessment even where they may be statute barred, taxpayer’s are not safe from audits, and these reassessments once the expiration of the four years has elapsed.
Fighting a Statute Barred Notice of Reassessment
If the CRA issues a statute barred notice of reassessment, they must provide their reasons for doing so. They must specifically analyze Subsection 298(4)(a) through (c) explaining why they believe they are allowed to issue the notice of reassessment. They may even cite previous caselaw attempting to prove that a certain situation is the same as another situation where the Tax Court of Canada has allowed the issuance of a statute barred notice of reassessment.
Once this statute barred reassessment is issued, a taxpayer may file a notice of objection arguing that the CRA is incorrect. If the notice of objection is not successful, you may further appeal the issue to the Tax Court of Canada.
If you are being audited, and you believe any potential notice of reassessment should be statute barred, you will still have to proceed through the audit providing the documentation the CRA is requesting. Getting a professional on your side from the start of your CRA audit is crucial if you are trying to rely on the statute barred timelines. Rosen Kirshen Tax Law has the experience, and expertise to help all taxpayers who might find themselves in this situation. Give us a call today to see how we can help you!
This article provides information of a general nature only. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in this article. If you have specific legal questions you should consult a lawyer.
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