25 February 2016 CBA Roundtable, Q. 9

Does CRA agree (consistently with Last, 2012 TCC 352, at para. 127 and Khan, 2011 TCC 481, paras. 15-16) that gross negligence penalties cannot be imposed under s. 285 where a person neglects to file a GST/HST return? CRA responded:

[W]hen a person knowingly, or under circumstances amounting to gross negligence, makes or participates in, or assents to or acquiesces in the making of a false statement or omission in a return, application, form, certificate, statement, invoice or answer (each… a “return”), then the gross negligence penalty is potentially applicable even where no GST/HST return has been filed. This is supported by… Kion…2009 TCC 447.

In other words, the fact that a registrant has not filed a return for a particular reporting period does not automatically preclude the potential application of the gross negligence penalty. The key factor to establish is whether the contravention of the ETA is the making of a false statement or omission in a return or whether it is the simple failure to file the return within the required time.

In general, a gross negligence penalty under section 285 of the ETA will not apply if a person has simply failed to file a Form GST60, GST/HST Return for Acquisition of Real Property….

The questioner indicated that a person may wish to correct the failure to file a GST60 return in order to have offsetting rebates applied under s. 296(2.1) (for example, landlord rebate) where the rebate is otherwise out of time. CRA stated:

In general, a gross negligence penalty under section 285 of the ETA will not apply if a person has simply failed to file a Form GST60, GST/HST Return for Acquisition of Real Property….

And then stated:

t should be noted that the VDP does not consider rebates. If a disclosure is submitted with rebate applications, these applications will be forwarded to rebates processing and will be subject to the normal review procedures for eligibility.

Similarly to ITA s. 163(2), the ETA gross negligence penalty provision (s. 285) references the making of “a false statement or omission in a return…statement…or answer” knowingly or in circumstances amounting to gross negligence. CRA asserted that “the gross negligence penalty is potentially applicable even where no GST/HST return has been filed,” and cited Kion, where “natural persons,” who had made false statements to have their profitable business partnership deregistered for GST purposes and had not filed GST returns, were subjected to gross negligence penalties.