What To Do When CRA Refuses Taxpayer Relief ' A Canadian Tax Lawyer's Case Commentary On Maverick V HMK, 2023 FC 1728

• Published date: 05 March 2024
• Subject Matter: Tax, Income Tax, Tax Authorities
• Law Firm: Rotfleisch & Samulovitch P.C.
• Author: Mr David Rotfleisch

Introduction: The Taxpayer Relief Provisions

Subsection 220(3.1) of the Income Tax Act provides the Canada Revenue Agency with broad discretion to grant taxpayer relief within the 10-year limitation period. Although the Income Tax Act did not specify the criteria for a taxpayer-relief request to be successful, a taxpayer must meet the requirements set out in the CRA's Information Circular 07-1R1 Taxpayer Relief Provisions to be entitled to relief. The most common situations that qualify for relief include three categories: extraordinary circumstances, financial hardship, and actions by the CRA. The CRA, however, does not have an exhaustive list of criteria for their decision-making process. Instead, the CRA must consider all circumstances presented in a taxpayer-relief request and taxpayers applying for relief are encouraged to send "any information and documents that you feel support your application." The CRA even states on its website that "everything received will be looked at and used in our review."

Yet, often times, taxpayers come across unreasonable CRA decisions denying relief requests with minimal or boiler-plate explanations. Mr. Mike Schnell, the director of Maverick Oilfield Services Ltd. and Latigo Trucking Ltd., is one of those who unfortunately had to fight against unreasonable CRA refusals.

Case Summary Maverick v HMK

Maverick Oilfield Services Ltd. & Latigo Trucking Ltd. v Attorney General of Canada, 2023 FC 1728, is a consolidated application for judicial review of three CRA review decisions made by two corporations for relief from interest and penalties accrued during their 2014 through 2016 taxations. Mr. Schnell is the director of the two corporations, Maverick Oilfield Services Ltd. and Latigo Trucking Ltd. The knowledgeable Canadian tax lawyers for the two corporations requested taxpayer relief primarily due to mismanagement of their former Chief Executive Officer who caused the corporations to fail to comply with payroll remittance obligations, under section 153 of the Income Tax Act. The basis for the requests includes extraordinary circumstances leading to financial hardship.

Although the CRA split its decisions into three parts, the reasons provided in the decisions were not significantly different, including:

• As there was no fraud involved according to the information CRA has, the owner had the responsibility to ensure that tax obligations of the corporations were fulfilled.
• Despite the history of compliance up to late 2016...