CRA confirms the application of its GST/HST wash transaction policy where ITCs claimed in the wrong entity

CRA confirmed that its wash transaction policy for mistakes by registrants engaged exclusively in commercial activity can apply to input tax credits claimed in the wrong entity, as well as to a failure to charge GST/HST. For example, two closely-related corporations (A and B) involved exclusively in commercial activity get two invoices mixed up, so that A mistakenly claims an ITC for the larger rather than smaller invoice, and B mistakenly claims an ITC for the smaller rather than larger invoice. CRA confirmed that the interest assessed on A for overclaiming an ITC will be limited to the lesser of the interest otherwise payable on the amount of the excess ITC and 4% of that ITC.

Neal Armstrong. Summary of 8 March 2018 CBA Roundtable, Q.24 under ETA s. 281.1(1).