CRA indicates that a taxpayer can make a voluntary disclosure where it twigs to the issue as a result of being charged for HST by a CRA-assessed 3rd party
CRA’s Memorandum on the GST/HST voluntary disclosure program states that a VDP application will not be considered voluntary if “enforcement action … relating to the subject matter of the VDP application has been initiated … against a third party, where the purpose and impact of the enforcement action against the third party are sufficiently related to the present application.” Regarding a situation where an unrelated supplier (Sco) had been supplying goods for resale to its customer (Aco), neither had been charging GST/HST based on what CRA would regard as a misinterpretation of a place-of-supply rule (in ETA s. 144), and Aco discovered this CRA view when CRA assessed Sco, who then charged the GST/HST to Aco, CRA stated:
[I]f Aco and Sco are not related, the application from Aco would likely be considered under VDP. Conversely, if Aco and Sco are related companies, Aco’s application would not be considered as voluntary due to the prior enforcement action (audit) that was conducted against Sco … .
The CRA Memorandum also states that the VDP applicant “will be required to waive their rights to object and appeal in relation to the specific matter disclosed in the VDP application.” CRA clarified that:
[T]he applicant is allowed to file a Notice of Objection in case of disagreement with respect to characterization issues, such as whether a supply is a taxable or exempt supply, or whether a particular supply is deemed to be made inside or outside Canada as a result of the application of the place of supply rule in section 144 ... .