10 October 1989 Income Tax Severed Letter ACC8643 F - Guidelines for Remission of Taxes and Write-off

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.

October 10, 1989

19(1)

Thank you for your letter of August 22, 1989 (your reference fill I concerning settlement of tax debts.  The information supplied was very helpful.  In regards to your information request concerning release of tax debt where serious bard ship is involved, the following comments apply.

There are no provisions under Canadian Income Tax Law to release taxpayers from debt in cases of serious hardship.  However, there are provisions in the Financial Administration Act for remission of taxes and write-off of tax debt under certain circumstances. These two remedies are detailed below.

Remission of Taxes

In accordance with subsection 17(1) of the Financial Administration Act, the Governor in Council on the recommendation of the Treasury Board is empowered to remit any Federal tax, penalty and interest whenever the public interest is best served by doing so.  Although there are other situations which could warrant remission, with respect to hardship the guidelines encompass those cases where extreme hardship to the individual and his family exists, or where a community or group of people will suffer.  An example of this would be the population of a town with one dominant employer whose business would be wound up irreplaceably by enforcement of payment of tax.  A remission request must he recommended by a Minister of the Crown, and although it covers only the Federal portion of the tax debt, the various Provinces have similar legislative provisions and remit the corresponding Provincial taxes.

If a remission is not granted, the circumstances may warrant write-off consideration (details follow).  If the tax debtor's situation is expected to improve in the foreseeable future, the account can be placed in "deferred" status, that is, referred back to the computer for a specified period of time for follow-up.  Any financial transactions that occur during this period will result in the account being automatically returned back to active status.  At the expiry of the specified time period the account is again reviewed for collectibility, and would likely be written-off at that time if there was no improvement to the financial situation.

Write-Off

Write-off of an account is a process by which the account is deleted from active account inventories.  The debt can be reinstated at will and would still be subject to all legal collection remedies.  Whereas remission of taxes is a process initiated by the taxpayer or his representative, write-off is a strictly internal procedure and is never communicated to the taxpayer.  Deletion of uncollectible accounts is also done in accordance with the Financial Administration Act, and is considered appropriate when there is no reasonable prospect of recovery.  With respect to write-off of a debt due to hardship, Treasury Board guidelines stipulate the Minister must be satisfied that the debtor:

a)     is incapable of paying the debt in whole or in part and is not reasonably expected to have the capacity to pay the debt in the foreseeable future, and

b)     does not own real or personal mortgageable property, is not purchasing property under the Veteran's Land Act and does not own financial assets that could be applied to discharging the debt in whole or in part, and

c)     the debtor or the debtor's spouse is in receipt of an income tested or needs tested benefit from the Government of Canada, or

     the tax debtor's family income is below the net monthly income level requiring payments from income towards debt as stated in the Guidelines on Payments From Income issued periodically by the Superintendent of Bankruptcy, Department of Consumer and Corporate Affairs.

In the case of a corporation, an account is very rarely, if ever, written off to alleviate hardship.  A corporate debt can only be deleted if the corporation is without assets, and is no longer operating.

Should you require further information or clarification of the preceding, please contact Ms. Karen Balsdon at (613) 954-1510.

We trust you will find this to your satisfaction.

Yours sincerely,

C. Savage A/DirectorProvincial and InternationalRelations Division

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