Section 224.1 - Recovery by deduction or set-off

Cases

Groulx v. Canada, 2010 DTC 5027 [at 6621], 2010 FCA 321

CPP/OAS pensions

In challenging a set-off under s. 224.1 of a tax debt of the taxpayer against 30% of Canada Pension Plan and Old Age Security payments receivable by the taxpayer, the taxpayer could not rely on a rule in the Civil Code of Quebec that provided that "compensation" cannot take place if the object of the debt is property that is exempt from seizure. The court found no evidence of a Parliamentary intention to import the Quebec civil law concept of "compensation" into statutory set-off.

Locations of other summaries Wordcount
Tax Topics - Statutory Interpretation - Provincial Law 82

Mintzer v. The Queen, 96 DTC 6027 (FCA)

CPP payments

A prohibition under the Canada Pension Plan Act against the attachment, or the seizure and execution, of Canada Pension Plan payments did not apply to "set-off" under s. 224.1 given that these were distinct concepts.

Words and Phrases
set-off

Clarkson Co. Ltd. as Receiver and Manager of Aero Trades (Western) Ltd. v. The Queen, 89 DTC 5050 (FCA)

effect of receiver

The Crown was entitled to set-off taxes owing by the taxpayer only against debts owing by the Crown to the taxpayer (in respect of air carrier services) that arose prior to the appointment of the receiver-manager of the taxpayer. The use of the phrase "become payable" did not work a change in the common law by making set-off available notwithstanding that an obligation to pay arises some time subsequent to appointment of a receiver.

See Also

La Banque Canadienne Nationale v. The Queen, 79 DTC 5178, [1979] CTC 165 (FCTD)

The effect of an assignment of accounts receivable under section 88 (now section 178) of the Bank Act was not to make the bank the creditor of the Crown for the assigned amounts, because a timely notice in accordance with section 82 of the financial Administration Act had not been given by the bank. The amounts owing to the assigning company by the Crown accordingly could be set off under s. 52(9) of the Excise Tax Act (similar to s. 224.1 of the Act) against federal sales taxes owing by the assigning company.

Administrative Policy

IC98-1R4 "Tax Collections Policies" 12 June 2013

usual policy not to set-off if appeal

We can offset (apply against another debt) your repayment or refund to debts for which you are liable. However, for debts that relate to the Income Tax Act, we will not usually offset a refund against an outstanding amount, other than a deemed trust debt, if the amount owing is the subject of an objection or appeal on which neither the CRA's Appeals Division nor the court has made a decision.

Locations of other summaries Wordcount
Tax Topics - Income Tax Act - Section 225.1 - Subsection 225.1(4) security for appeal to FCA 80

Articles

Marie-Andrée Beaudry, Dean Kraus, "Selected Income Tax Considerations in the Court-Approved Debt Restructurings and Liquidations", 2015 Annual CTF Conference paper

Limitations on CRA compensation (set-off) rights (p. 13:36)

While Revenu Québec followed the decision in DIMS Construction [fn 111: …2005 SCC 52] with regards to formal bankruptcies, until quite recently it continued to apply the compensation mechanism to use post-insolvency refunds owed to the tax debtor to reduce pre-insolvency debts when the debtor was the subject of an approved proposal under the BIA. The justification provided by the tax authorities for this distinction between a bankruptcy and a proposal was that the estate of the debtor company is not vested in the trustee for a proposal as it is for formal bankruptcy. Debtors claiming harm from this continued practice filed a class action lawsuit against Revenu Québec. [fn 112: Brisbois c. Agence du Revenu du Québec, 2014 QCCS 83.] Revenu Québec entered into a settlement agreement on June 19, 2014 accepting the principles of DIMS. Construction that pre-filing debts should not be offset by post-filing refunds.

More recently, in its decision Métaux Kitco, the Quebec Superior Court saw no reason to differentiate between the context of a formal bankruptcy and that of an arrangement under CCAA, extending the applicability of the DIMS Construction decision to CCAA. ...

Bowman, "Collections under the Income Tax Act", 1990 Conference Report, c. 22.