Where a person receives an assessment for income tax purposes and files an objection, the Income Tax Act prevents the CRA from taking collection measures in most cases until the objection is settled. However, the CRA is not subject to the same restraint where a person is assessed for GST/HST purposes. Section 315 of the Excise Tax Act (ETA) provides that, where a notice of assessment is issued, any amount assessed (including interest and penalties) becomes payable “forthwith” – meaning immediately.
This can have a serious impact on the taxpayer if the amount of the assessment is significant. If suitable payment arrangements are not made, or if the assessment is not paid, the CRA can commence collection actions, which could include garnishment or the seizing of assets. Under the ETA, an assessment is valid and binding unless (and until) it is vacated under an objection or appeal. As a result, taxpayers are required to pay GST/HST assessments right away, even if an objection or appeal is filed. It often takes a year or more for a notice of objection or appeal to be settled, resulting in a potentially huge burden on the taxpayer.
Postponement of collection
Despite the onerous payment requirements for GST/HST assessments, there is some relief available. If an objection or appeal has been filed, Section 314 of the ETA requires the Minister to accept security for the payment of any amount that is in dispute. While the Minister is required to accept the security, the form and amount of the security is subject to the CRA’s discretion.
Section 315 of the ETA provides further relief, although this is purely subject to the CRA’s discretion. Collections actions against a person for all or any part of an assessment for GST/HST may be postponed without posting security under the following conditions:
- The person being assessed has an otherwise satisfactory compliance history.
- There are reasonable differences in the interpretation of the legislation.
- The assessment relates to GST/HST that has not been collected from recipients.
- The taxpayer is financially secure.
- There are extraordinary circumstances that may apply.
Typically, the CRA will not postpone a collection action if they believe a delay will jeopardize the recovery of the assessed amount. In addition, there is no prescribed form when applying for relief. A request is filed with the CRA’s collections department. The facts and reasons for requesting relief will vary from case to case, and the information required for each request will depend on the circumstances.
If you have received a GST/HST assessment and are considering whether to file an objection or appeal, we can assist you in determining whether you may qualify for relief from the CRA’s collections actions.
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