Want to Appeal a CRA Tax Decision? Here are the Process Steps for Tax Court of Canada

Introduction – How CRA Assessments are Appealed to the Tax Court of Canada

The Tax Court is a federal court that has the jurisdiction to deal with matters involving all taxpayers including corporations and trusts related to the Canada Revenue Agency (“CRA”). The Tax Court was created by the Tax Court of Canada Act, RSC 1985, c T-2, which clearly sets out the powers granted to the Tax Court.

When a taxpayer disagrees with a CRA decision, the taxpayer may appeal an assessment to the Tax Court or seek judicial review at the Federal Court, depending on the specifics of the claim. If the matter in dispute is a discretionary decision of the Minister, the appropriate court is the Federal Court. If the matter is non-discretionary, such as an income tax assessment, the appropriate court is the Tax Court.

This article will examine the procedures of Tax Court and assist you in your application to the Tax Court should you contemplate seeking judicial review on a CRA decision. However, our recommendation is that in almost all cases an experienced Canadian tax litigation lawyer should be retained. Corporations must retain a Canadian tax lawyer to represent them in court.

First Document to File: Notice of Appeal

A taxpayer may file a Notice of Appeal to the Tax Court only when the taxpayer has first utilized the internal appeal mechanism within the CRA. Therefore, the taxpayer must have filed a Notice of Objection with the CRA. The taxpayer may then file a Notice of Appeal to the Tax Court either within 90 days from the date of the issuance of the CRA notice of reassessment, confirmation, or determination as a result of his or her objection or within 90 days of filing the Notice of Objection if the objection has not been dealt with by the CRA in an income tax case or 180 days in a GST case. Moreover, for the Tax Court to accept to consider the appeal, the tax dispute with the CRA must relate to one of the 14 statutes over which the Tax Court has power.

The Notice of Appeal notifies the Tax Court that the taxpayer is appealing a CRA decision. The Notice of Appeal must set out the reasons for the appeal and the relevant facts such as the date of the assessment or assessments.

Two types of procedures are generally available: the Informal Procedure and the General Procedure.

Informal Procedure

The Informal Procedure simplifies the legal steps and requirements in the process, and there is no filing fee, unlike with the General Procedure.

For income tax appeals, the Informal Procedure is limited to cases in which the amount of federal tax and penalties in dispute for each taxation year, excluding interest, is $25,000 or less and to cases in which the amount of loss in question is $50,000 or less. For GST appeals, the Informal Procedure is limited to cases in which the amount at issue is $50,000 or less.

The steps involved in the Informal Procedure are as follows:

1. The taxpayer (the “Appellant”) files the Notice of Appeal to the Tax Court.
2. The Registry verifies the Notice of Appeal to ensure it has all the required information.
3. The Registry will assign a court file number and send the Appellant an acknowledgement of receipt.
4. The Registry will serve a copy of the Notice of Appeal on His Majesty in right of Canada (the CRA) by sending a copy to the office of the Deputy Attorney General of Canada (the “Respondent”).
5. The Respondent will file a Reply to Notice of Appeal within 60 days.
6. The Registry will send both parties a Notice of Hearing at least 30 days before the court hearing date.
7. On the hearing day, both parties present the case to the judge.
8. The judge may render a decision on the same day or reserve his or her decision, but no later than 90 daysafter the day the hearing is concluded.

General Procedure

The General Procedure is more formal in its procedures and legal steps. There are filing fees depending on the amount in dispute:

• The filing fee is $250, if the amount in issue is less than $50,000, and for appeals in which a loss has been determined, where the amount of loss in issue is less than $100,000.
• The filing fee is $400, if the amount in issue is $50,000 or more but less than $150,000, and for appeals in which a loss has been determined, where the amount of loss in issue is $100,000 or more but less than $300,000.
• The filing fee is $550, if the amount in issue is $150,000 or more, and for appeals in which a loss has been determined, where the amount of loss in issue is $300,000 or more.

Here are the steps involved in the General Procedure:

1. The taxpayer (the “Appellant”) files the Notice of Appeal to the Tax Court.
2. The Registry verifies the Notice of Appeal to ensure it has all the required information.
3. The Appellant pays the filing fee within five days of the receipt of the Notice of Appeal from the Registry.
4. The Registry will assign a court file number and send the Appellant a certificate of service.
5. The Registry will serve a copy of the Notice of Appeal on His Majesty in right of Canada (the CRA) by sending a copy to the office of the Deputy Attorney General of Canada (the “Respondent”).
6. The Respondent will file a Reply to Notice of Appeal within 60 days.
7. The Appellant may choose to file an Answer to the Reply to the Notice of Appeal, which shall be filed and served within 30 days.
8. Upon the close of pleadings, the parties submit a timetable of dates for the next steps. The Tax Court will issue an order setting out the dates for the next steps, based on the dates submitted by the parties.
9. The parties proceed with the next steps in accordance with the timetable. These steps include service of lists of documents between parties, examinations of discovery, satisfaction of undertakings, and communication with the Court.
10. One party may put an offer of settlement to the other party, subject to the other party’s acceptance, rejection, or counteroffer.
11. If no settlement is reached, the parties apply to the Registrar to fix the date for the hearing when they are ready.
12. On the hearing day, both parties present the case to the judge.
13. The judge may render a decision on the same day or reserve his or her decision.

Can You Self-represent at the Tax Court?

‘Self-Represented Litigant’ describes people who go to court without a lawyer and represent themselves or through an agent. The ‘Self-Represented Litigant’ is expected to be familiar with the Rules of the Court.

For appeals which fall under the Informal Guidelines, appellants may be self-represented or choose to be represented by a lawyer.

However, for appeals which fall under the General Procedure, section 17.1 of the Tax Court of Canada Act and the Canada v. BCS Group Business Services Inc., 2020 FCA 205, decision of the Federal Court of Appeal provide following guidelines:

1. A party to a proceeding who is an individual may act in person or be represented by a lawyer.
2. Where a party to a proceeding is a corporation, that party must be represented by lawyer.
3. Where a party to a proceeding is not an individual and not a corporation, that party shall be represented by lawyer except with leave of the Court and on any conditions that it may determine.

In all cases, it is recommended that you retain a top Canadian tax litigation lawyer prior to commencing an appeal in the Tax Court. Tax matters are highly complicated, and the legal system is not easy to navigate without a legal training. Obtaining experienced Canadian litigation tax lawyers will maximize your chance of succeeding in tax court.

Ways to Resolve Your Appeal

It is usually recommended to attempt to resolve the dispute before going to court, as litigation is notoriously costly and does not guarantee a desirable result.

Prior to a court hearing, the appeal can be resolved through settlement. Settlement describes a process where the parties, taxpayer and the CRA, reach an agreement regarding the dispute and to conclude the litigation. The Court can schedule a Settlement Conference on its own initiative or at the request of a party.

If the matter proceeds to a court hearing, the appeal will be resolved by having both parties appear in court to present their versions of the facts to a judge. Then, the judge will then adjudicate the matter based on the evidence and arguments presented.

Conclusion – Review of the Procedures to appeal to the Tax Court of Canada

This article explained the procedure of seeking judicial review at the Tax Court of Canada. A taxpayer appealing to the Tax Court must file a Notice of Appeal, and follow Informal Procedure or Formal Procedure, depending on the specifics of the matter. The Informal Procedure is a simplified process with no filing fees, typically used for disputes involving smaller amounts. The General Procedure is more formal and has filing fees, and it is used for disputes involving larger amounts or more complex issues.

Under certain circumstances, an individual taxpayer has the option to self-represent as court. However, it is always recommended to obtain legal counsel to guide and assist the taxpayer in litigation.

Canadian Tax Lawyer Assistance

If you are thinking about challenging a CRA decision and seeking judicial review, get in touch with our Experienced Canadian Tax litigation lawyers. Effective tax litigation planning and having experienced Canadian tax litigators on your side are necessary to maximize litigation outcomes. Our Canadian tax law firm can give you the counsel and representation that you need.

Pro Tax Tips – Important Things to Remember when Appealing to the Tax Court

• Exhaust all internal CRA appeal mechanisms before going to court: you must first try to resolve your dispute within the CRA by filing a Notice of Objection. Only after receiving a decision on your objection can you appeal to the Tax Court.
• Understand the Tax Court procedures and your options: familiarize yourself with these procedures to determine the best course of action for your situation. Especially when you are choosing between the Informal and General Procedures, it is crucial to understand the respective eligibility criteria and filing fees.
• Be organized and meet deadlines: you must file your Notice of Appeal within the 90-day deadline. Ensure you gather all necessary documentation and information to support your case and adhere to all relevant deadlines throughout the process.
• Consider seeking professional help: if you’re facing a tax dispute, it’s highly advisable to consult with a qualified Canadian tax litigation lawyer. We can provide expert guidance and representation, increasing your chances of a favorable outcome.

FAQ

I disagree with the CRA’s decision on my tax return. Can I take them to court?

Yes, you can challenge the CRA’s decision by filing an appeal with the Tax Court of Canada. However, before doing so, you must first exhaust all internal appeal mechanisms within the CRA, such as filing a Notice of Objection.

Can I represent myself in Tax Court?

You can represent yourself in Tax Court if your appeal falls under the Informal Procedure. However, it is strongly recommended that you seek legal advice or representation from a top Canadian tax litigation lawyer regardless of which procedure you elect, since tax litigation is very complicated and technical to navigate for an individual with no legal experience.

Is there a way to resolve my dispute with the CRA without going to court?

Yes, you can try to resolve your dispute through settlement discussions with the CRA during the process. The Tax Court may also schedule a Settlement Conference to help facilitate a resolution.

DISCLAIMER: This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.