Filiatrault – Tax Court of Canada finds that there is a due diligence defence to the imposition of interest under the ETA

Smith J found that an individual, who received a permit from the Quebec Order of Psychologists which had the effect of permitting him to practise psychotherapy, was also practising psychology in light of a statement in the Professional Code of Quebec that “psychotherapy is psychological treatment.” Smith J nonetheless found that the taxpayer did not qualify as a “practitioner,” whose definition required in relevant part that the supply of psychological services be by “a person who…practises the profession of…psychology.” He found that the quoted phrase “is reserved to psychologists who are members of the Ordre des psychologues du Québec,” i.e, merely being issued a certificate by the Order did not render him a member of the psychololgists’ profession.

CRA had assessed the taxpayer for interest under ETA s. 280 for his failure to file returns for what had now been found to be a taxable activity. Smith J found that such interest was not payable because the taxpayer had established a due diligence defence, based on having consulted on the tax status of his supplies with his accountant and with professionals in his health care network.

In support for his view that a due diligence defence was available, Smith J cited a case based on a previous version of s. 280 which, on its terms, imposed a “penalty” rather than “interest,” without giving any indication that he was aware of this statutory wording change. (Finance likely instigated this amendment because it did not like a case which found that a due diligence defence was available under s. 280.) Accordingly, this aspect of his decision may be per incuriam.

Neal Armstrong. Summaries of Filiatrault v. The Queen, 2017 TCC 232 under ETA Sched. V, Pt. II, s. 1 – “practitioner,” s. 280(1).