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Postponement of GST/HST Debt Collection

Published on September 27, 2019

A recently published article by our own Farras Ghani, CPA, CA in the Canadian Tax Foundation's Canadian Tax Focus from August 2019 (link to the article here with the text listed below:

Postponement of GST/HST Debt Collection

While an assessment is under objection, subsection 225.1(2) of the ITA prevents the CRA (subject to certain exceptions) from undertaking aggressive collection tactics, such as issuing requirements to pay and garnishing amounts (sections 224 through 224.3). However, no comparable relief is available in the Excise Tax Act (ETA) from the similar collection measures specified in ETA sections 316 to 321: subsection 315(2) requires any amount assessed by the minister (including interest and penalties) to be payable "forthwith," regardless of whether an objection has been filed. This can cause operational and cash flow challenges for taxpayers that threaten the continuity of their business operations. Nevertheless, some relief measures are available, although they are subject to CRA discretion and interest continues to accrue.

Under ETA subsection 314(2), the CRA will accept a security, satisfactory to the minister in form and amount, for the GST/HST that is under dispute (including penalties and interest). Where posting a security is not feasible, taxpayers can look for relief under subsection 315(3), which allows the minister to postpone the collection in respect of all or any part of any amount related to a GST/HST assessment that is under objection (subject to terms and conditions stipulated by the minister). According to the CRA's National Collections Manual (available on various commercial tax databases), the relevant terms and conditions are those listed below, and the final two are particularly difficult to meet:

  • relevant information is provided after an assessment that may result in the assessment being overturned or the objection/appeal identifies reasonable differences in the interpretation of the legislation;
  • all associated accounts remain current with filing/remitting requirements;
  • the business is in good financial order during the period of the objection and/or appeal;
  • all disputed amounts have not already been collected by the taxpayer; and
  • Appeals is confident that the assessment will be vacated.
The procedure to be followed under subsection 315(3) is set out in the National Collections Manual. The request has to be approved by an appropriate delegated authority; appropriate officials within the CRA are listed in "Delegation Under the Excise Tax Act: Administrative Consolidation," April 5, 2016. There is no prescribed form; thus, such a request would have to be discussed with the CRA's collection department.

The subsection 315(3) alternative will not be available where the CRA has applied for a jeopardy order to the superior court of a province or to the FC (ETA subsection 322.1(2)), which would allow the CRA to assess before the completion of the current reporting period and take immediate collections action. The CRA will take this action where it identifies a danger of loss if the tax collection is delayed.

Farras Ghani
Connelly & Koshy Professional Corporation, Ottawa

Canadian Tax Focus
Volume 9, Number 3, August 2019
©2019, Canadian Tax Foundation