CRA effectively indicates that a builder who failed to self-assess GST on the construction of a rental complex may be better off lying in the grass

A non-registered corporation did not self-assess under ETA s. 191(3) on completing the construction of a triplex nor did it claim input tax credits. If it simply lay in the grass and did nothing until CRA discovered this situation on audit, s. 296(2.1), by virtue of requiring CRA, at the time of reassessing the corporation for undeclared GST, to retroactively allow any available but unclaimed rebates, would protect the corporation against any charges for interest (or late-filed return penalty under s. 280.1),) provided that the rebate claims for unclaimed ITCs and the s. 256.2 new rental residential property rebate put it in a net refund position. Would the answer change if the corporation did not wait for any audit and sent to CRA, in the same envelope, an s. 191(3) self-assessment filing and documentary support showing the availability of the offsetting rebate claims?

CRA indicated that this would be treated as the equivalent of a late-filed return and late rebate claims, rather than engaging the s. 296(2.1) netting rule, so that interest and penalties would apply. The correct procedure for accessing penalty and interest relief was to follow and comply with the voluntary disclosure program rules.

Thus, CRA effectively indicated that the corporation very well might be better off lying in the grass (and the extreme brevity of its response showed understandable discomfort with this point).

Neal Armstrong. Summary of 8 March 2018 CBA Commodity Tax Roundtable, Q.12 under ETA s. 296(2.1).