9 October 1992 Income Tax Severed Letter 9230100 - 1992 Rulings Tax Seminar - Central Region, Fairness Package

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

1992 Rulings Tax Seminar
                       Central Region

Question from Enquiries and Office Examination Division, North York D.O.

Directive CA92-25 dated April 16, 1992 sets out specific criteria in paragraphs 6 & 7 for the cancellation of penalties and related interest assessed on source deduction accounts; the paragraphs which follow, however, appear to be more general and allow for discretionary consideration. If a particular situation fits within the parameters of paragraph 6 but the company still cannot pay due to financial hardship, is the Department precluded from cancelling the penalties and interest accrued prior to the commencement of payments?

Note: It appears that the concern relates to the proviso contained in the last sentence of paragraph 6 on page 3 of the Directive. If the employer is unable to conclude a reasonable payment arrangement because the interest charges absorb a significant portion of the payments, is the Department precluded from waiving the penalty and interest if the taxpayer has not yet started making the payments so agreed upon. It may be that the enquirer was not aware that the last sentence only applies to the latter case mentioned in the paragraph and that nothing in that paragraph suggests that the Department cannot exercise its discretion in waiving interest and penalties where collection action has been suspended because of an inability to pay and thus has not commenced to make such payments. Note as well that the enquirer has used the word "cancel" whereas the note on the bottom of page one of the Directive suggests that the word "waive" should be used where the interest or penalty has been correctly assessed.

Response

The authority by which a Director of a Taxation Centre or District Office is able to cancel or waive all or any portion of the penalties and related interest imposed under the Act is found in paragraph 900(2)(b) of the Regulations to the Income Tax Act. The specific provision which sets out the circumstances under which the Director has the discretion to cancel or waive such penalties and interest is found in subsection 220(3.1) of the Act which was added as a result of the Fairness Package. This authority is limited to interest and penalties assessed in respect of 1985 and subsequent taxation years but is otherwise completely discretionary. The above mentioned Directive CA92-25 was issued by Source Deductions Division and contains the Departmental guidelines to be used in applying this provision in respect of assessments of interest and penalty on source deduction accounts. Questions concerning these guidelines should be directed to that Division of Head Office rather than to Rulings Directorate.

923010 A. Humenuk October 9, 1992

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