Canada Revenue Agency GST/HST audit activities

Changes in the CRA’s approach

For small businesses (generally businesses with annual sales of less than $4 million), the CRA has implemented a new audit approach whereby, instead of combined income tax and GST/HST audits, the agency will conduct separate audits. In our experience, the CRA’s increased focus has prompted auditors to focus on GST/HST issues previously overlooked during the combined tax audits era.

General observations of the CRA’s audit activities

We at Collins Barrow have noticed over the past year an increase in the CRA’s GST/HST audit activities, particularly where refund or rebate claims are involved. The increase in audit frequency has been accompanied by an increase in the scrutiny of documentation by CRA auditors. More returns in refund positions are being scrutinized at the pre-assessment stage than ever before, resulting in cash flow issues for clients.

To ensure the new CRA audit approach does not impose additional administrative costs and delays in receiving refunds/rebates, businesses should pay close attention to managing the audit process. To respond to the CRA’s increased focus, businesses will need to ensure professionals with strong knowledge of the GST/HST legislation, regulations, and administrative procedures are involved in the process. If you are subject to an audit, contact your Collins Barrow advisor for assistance and guidance.

Altaf Sarangi, CA is a partner in the Toronto office of Collins Barrow.