Where GST/HST returns are unfiled due to administrative bookkeeping or accounting oversight, is the penalty applicable? CRA noted that given that “a false statement be made in a return, application, form, certificate, statement, invoice, or answer,” not filing a return is insufficient grounds for the penalty, but then stated:
Kion … suggests that even where no return has been filed, a gross negligence penalty under section 285 is permissible. In this case, the registrants provided false information to cause a partnership to be deregistered for GST/HST purposes.
Similarly, CRA noted that “the fact that a registrant solely fails to respond to an audit contact letter or fails to provide records on time is generally insufficient grounds to apply gross negligence penalties” – and that the s. 284 penalty instead could be applied where there was failure “to provide any information or document when and as required.”
Does the penalty apply where there was a failure to collect and remit GST/HST on a new one-time revenue stream due to administrative oversight? CRA responded:
Usually, gross negligence penalties are not assessed where it is considered that there was a genuine misinterpretation of the ETA on the part of the registrant and it is reasonable to assume that the registrant did not know whether a particular supply was a taxable supply.
Generally speaking, no penalty will be assessed where it appears that the registrant was confused about the reporting of an amount and it is the first time a penalty is being considered. However, gross negligence penalties may be considered based on the materiality of the error or where the registrant was previously advised of penalty consideration for similar conduct.
