CRA publishes substantial changes to the VDP

CRA has substantially amended its ITA Circular and GST/HST Memorandum on the voluntary disclosure program (VDP). It has ditched the concept of the “Limited Program,” e.g., not waiving any interest if there is some indication of intentional conduct or, perhaps, if the taxpayer is large and sophisticated.

CRA now recognizes two categories of voluntary disclosure, with corresponding scaling of the degree of relief. If the VDP application was “unprompted”, then the application will be eligible for the "general relief," i.e., receiving 75% relief of the applicable interest and 100% relief of the applicable penalties. Where there is a “prompted” application, the applicant will receive 25% relief of the applicable interest and up to 100% relief of the applicable penalties. (As before, where there is a “wash transaction” for GST/HST purposes, there is 100% interest relief.)

An unprompted application includes one made following an education letter or notice that offers general guidance and filing information related to a particular topic such as unreported income or ineligible expenses. A prompted application would include an application made following verbal or written communication about an identified compliance issue related to the return or other disclosure, or one made after CRA had already received information from third-party sources regarding the potential involvement of the taxpayer or a related taxpayer in tax non-compliance.

The applicant should include documents for foreign-sourced income or assets for the most recent 10 years, for Canadian-sourced income or assets for the most recent six years, and for the most recent four years regarding information about GST/HST.

CRA indicates that these changes to the VDP will come into effect on October 1, 2025, and that applications received prior to that date will be considered for VDP relief under the old guidelines. Presumably, somebody will make an application for judicial review if CRA rigidly refuses to apply the more generous relief regarding applications that were made prior to October 2025.

Neal Armstrong. Summary of IC00-1R7 dated 10 September 2025 under ITA s. 220(3.1) and summary of GST/HST Memorandum 16-5-1 dated 10 September 2025 under ETA s. 281.1(1).