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Change of address notification to CRA for income tax was enough for GST/HST
The recent Kirschke decision of the Tax Court of Canada (2019 TCC 68) was an application for extension of time to file a late notice of objection. The application was technically dismissed, but for reasons that made it clear that the applicant won her case. (Normally an objection to an income tax or GST/HST assessment must be filed within 90 days of the date on the Notice of Assessment. In certain cases an extension of up to one year is possible. Without a valid Notice of Objection filed on time, one cannot appeal the assessment.)
Ms Kirschke had been registered for GST/HST, but her business (a restaurant) stopped operating before 2010. She continued to file nil GST/HST returns for 2010-2014, not cancelling her registration because she thought she might reopen a restaurant in a new location. (She was still carrying on another business, but it was a mortgage broker business supplying only exempt financial services, so she did not need to collect any GST/HST.)
When she moved in 2015, Ms Kirschke notified the CRA of her move for income tax purposes. However, she did not think to notify the CRA of the change for GST/HST purposes.
In June 2016, the CRA assessed Ms Kirschke for not collecting and remitting HST for five years, based on her reported business income on her income tax returns. CRA officers had previously contacted her by telephone and had her telephone number, but they did not realize that they did not have her current address. When her accountant was unhelpful in providing information over the phone (he dealt only with her income tax returns), the CRA sent a proposal letter to Ms Kirschke's old address, which she never received. When she did not reply, the assessments were issued, again to the old address. Ms Kirschke did not find out about them until March 2018 when CRA Collections wrote to her at her new address demanding payment.
Ms Kirschke wanted to object to the assessments. She first filed an application for extension of time, which was rejected by the CRA as having been filed too late. She then applied to the Tax Court for the extension of time.
The Tax Court ruled that the Notices of Assessment had not been correctly mailed. Ms Kirschke had notified the CRA of her change of address, and could not have known that her notification for income tax purposes would not be valid for GST/HST purposes.
The tax legislation deems anything mailed by first-class mail to be received on the day it is mailed; but the case law has established that this rule applies only if the mail is sent to the correct address, and a taxpayer who moves is responsible to ensure that the CRA has their correct address.
The Court found Ms Kirschke credible, and believed that she indeed did not receive the proposal letter or the Notices of Assessment in 2016.
In the circumstances, the judge found that the Notices of Assessment were never validly sent. However, this did not mean that the extension of time should be granted. Instead, the Court dismissed Ms Kirschke's application, while ruling that when she filed a Notice of Objection in May 2018, that was within the 90-day objection period, because she did not find out about the assessments until March 2018. In other words, she did not need an extension of time because her objection was filed on time.
Chalk one up for common sense!
This letter summarizes recent tax developments and tax planning opportunities from a third-party affiliate; however, we recommend that you consult with an expert before embarking on any of the suggestions contained in this blog post, which are appropriate to your own specific requirements. Please feel free to get in touch with Lee & Sharpe to discuss anything detailed above, we would be pleased to help.
Adam H. Sharpe
Hello, my name is Adam Sharpe, I am a partner at Lee & Sharpe.
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