Matthew Boadi Professional Corp. – Federal Court finds that CRA failed to consider whether late T1135s were filed “voluntarily” for earlier years notwithstanding subsequent years being under review

A taxpayer had a history of filing its T2 returns late and had been subject to various CRA demands to file them. It then became aware that it should have been filing T1135s respecting some foreign real estate, and it filed late T1125s in March 2015 for its 2005 to 2013 taxation years in reliance on the voluntary disclosure program. CRA denied VDP relief on the basis that this disclosure was not voluntary, i.e., the related T2 returns were subject to CRA “enforcement action” for having been filed late.

Gascon J found that this approach was reasonable respecting the T1135s for 2011 to 2013 given that the related T2 returns had finally been filed at that point, but had not yet been assessed. He stated that “the enforcement action taken by the CRA [i.e., assessing these T2 returns] would likely have uncovered its obligation to file T1135 returns” for those years. However, he was unwilling to make the same inference with respect to the earlier years, and there was no evidence that CRA had thought adequately about the proposition that it was perhaps unlikely that in assessing the later returns it would not have focussed on the absence of T1135s for the earlier years – and, in fact, the CRA officer appeared to not realize that those earlier years had already been assessed or, at any rate, was indifferent to that fact.

Accordingly, the matter was referred back to a different CRA delegate for reconsideration.

Neal Armstrong. Summary of Matthew Boadi Professional Corporation v. Canada (Attorney General), 2018 FC 53 under s. 220(3.1).