CRA publishes its Communiqué on examining tax accrual working papers
CRA has published its Communiqué on “Obtaining Information for Audit Purposes” including tax accrual working papers and CRA’s interpretation of BP.
It was drafted before the Cameco decision was affirmed in the FCA. CRA states that “Pending a final decision in this case, CRA officials can continue to … request that individuals be interviewed.”
CRA considers that tax accrual working papers, “particularly the list of uncertain tax positions,” can be requested “where CRA officials determine there is a higher risk of non-compliance” – and the Communiqué states that “A taxpayer with large unexplained tax reserves may be considered to be at a higher risk of non-compliance.”
CRA also states:
The taxpayer’s list of uncertain tax positions that relates to the tax reserve in their financial statements is not a privileged document. …
Provided all the relevant facts of the transactions are disclosed, including the taxpayer's purpose or purposes in undertaking a transaction or series of transactions, exclusions of their advisors’ analysis of the legal and tax effects of the transactions may be accommodated.
The CRA’s position is that taxpayers are required to disclose sufficient detail regarding their business and tax transactions for the CRA to fulfill its mandate of assessing taxes owing. Where the criteria outlined in the communiqué are met, the CRA considers that it retains the right to request tax accrual working papers, including a list of uncertain tax positions. A request for the taxpayer’s list of uncertain tax positions in these circumstances is not a request that the taxpayer self-audit.
Neal Armstrong. Summary of AD-19-02 Obtaining Information for Audit Purposes 2019-03-21 under s. 231.1(1)(a).