Subsection 230(1) - Records and books
Cases
Sidhu v. MNR, 93 DTC 5453, [1993] 2 CTC 278 (FCA)
The trial judge had committed an error of law when he concluded that failure of the taxpayers to keep proper records of wages paid by them to employees was fatal to their claim for a corresponding deduction from income. Although the requirement of s. 230(1) was absolute, the consequence of not complying was conviction for an offence under s. 238(2), rather than a necessary conclusion that the transactions which ought to have been recorded did not occur.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Evidence | 41 |
R. v. McKinlay Transport Ltd., 85 DTC 5537, [1986] 1 CTC 29 (Ont. Prov. Ct.), aff'd 87 DTC 5438, [1987] 2 CTC (S.C.O.)
Sections 230(1) and 230(3) are necessarily incidental to the federal powers of taxation exercised under the Act, and accordingly are not ultra vires. The Minister could require the taxpayer to keep its books and records at a place of business in Canada, rather than on a computer system in Michigan.
It was stated, obiter, that s. 230(1) permits "the temporary transfer of records from time to time away from the place of business or residence provided that, generally, they are 'kept' there."
See Also
Contact Lens King Inc. v. Canada, 2022 FCA 154
In further finding that ETA s. 286(1) did not require the appellant to obtain and retain copies of the prescriptions, LeBlanc JA stated (at para. 68 TaxIntepretations translation):
[T]he Act does not dictate the precise content of the records referred to in subsection 286(1). …Whether a person covered by this provision has kept adequate records is a question of fact. An incomplete record in the eyes of the Minister is not in itself fatal, as the taxpayer can ultimately establish, by means of sufficient and credible evidence, the validity of the claims against the Notice of Assessment under challenge.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Excise Tax Act - Schedules - Schedule VI - Part II - Section 9 | a requirement to make supplies pursuant to a prescription did not require obtaining a copy of the prescription | 462 |
| Tax Topics - Excise Tax Act - Section 286 - Subsection 286(1) | no particular form of documentary evidence required by s. 286(1) | 228 |
| Tax Topics - Statutory Interpretation - Inserting Words | not role of courts to add words | 134 |
Administrative Policy
11 October 2019 APFF Roundtable Q. 8, 2019-0821311C6 F - APFF 2019 Q.8: Surplus Documentation
Canco, which did not prepare a detailed calculation of its exempt surplus, hybrid surplus and taxable surplus accounts, nor of its hybrid underlying tax and underlying foreign tax accounts in respect of FA. FA claimed a s. 113(1) deduction equalling the amount of a dividend received from a wholly-owned foreign affiliate (“FA”) based on the general ordering rules in Regs. 5900(1) and 5901(1). Should a more careful review indicate that the dividend was not otherwise fully sheltered by the 113 Deduction, Canco would wish to utilize the adjusted cost base (“ACB”) of the FA shares.
Are detailed surplus account computations essential to support the s. 113 deduction? In responding affirmatively, CRA stated:
If a taxpayer does not submit complete computations of surplus to the CRA, the general practice of the CRA is to refuse the deduction claimed under subsection 113(1).
Furthermore, taxpayers are also responsible for documenting their own affairs in a reasonable manner. In that regard, subsection 230(1) expressly provides that they must keep records and books of account in such form and containing such information as will enable the taxes payable under the Income Tax Act to be determined.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 5901 - Subsection 5901(2) - Paragraph 5901(2)(b) | failure to prepare surplus accounts will preclude a late-filed Reg. 5901(2)(b) election | 186 |
5 October 2012 Roundtable, 2012-0454151C6 F - Registre des déplacements
Is an employer required to obtain an employee's travel logbook when providing the employee with a vehicle; and if such a record is not provided, how should the employer calculate taxable benefits? CRA responded:
By virtue of section 230(1) an employer must keep records and books of account to determine the amount of taxes payable under the Act. However, it does not set out documentary requirements for recording the usage of a vehicle.
The best way to determine that a vehicle is used for commercial or personal purposes is to keep an accurate record of all trips made for the whole year, including for each trip the date, destination, the reason for the travel and the distance traveled.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(k) | onus on employer to support benefit computation if kilometer log | 162 |
20 February 2008 External T.I. 2007-0246241E5 F - Records and books
Regarding the reference in T4036 to maintaining "other supporting documents" to evidence expenses, CRA stated:
The CRA has not developed an exhaustive list of items that may constitute "other supporting documents" to support expenses claimed by a taxpayer. However, the following documents, among others, could arguably constitute such documentation that could be used to support a particular expense: banking documents such as returned cheques and mortgage statements; and a logbook showing the total kilometres driven by a motor vehicle used for an eligible purpose to earn rental income.
3 January 2007 External T.I. 2006-0180601E5 F - Facturation entre deux sociétés affiliées.
Is there a need for written invoicing for management services between two non-arm's length corporations? CRA indicated this is not required under the Act, but invoices remain proof of income tax liability thereunder – and, in this regard, referred to various statements in IC-78-10R4 regarding record retention.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Evidence | invoices between domestic affiliates are not required, but are recommended | 47 |
13 December 2006 External T.I. 2005-0156201E5 F - Records on Heat Sensitized Paper
A taxpayer receives receipts from suppliers on thermal paper, the information on which naturally disappears after a few months. CRA noted that it “has not established a specific position with regard to the retention of supporting documents on thermal paper,” that it “is CRA's practice to disallow expenses that are not supported by appropriate documentation, unless there is other satisfactory evidence to support the amount claimed” and that Keating (2001 DTC 3750) indicated “that non-compliance with subsection 230(1), in and of itself, is not sufficient to conclude that an expense was not made, and that in such a case, the taxpayer bears the burden of proving that the expense was incurred.”
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Evidence | documentary requirements if a receipt is not available | 202 |
90 C.P.T.J. - Q.18
Electronically-produced data generally is considered to be "records".
88 C.R. - F.Q.11
Although the auditor has no statutory right to examine the records of a foreign subsidiary, the Canadian parent is expected to make available all books and records necessary the FAPI income that should be reported.
IC 78-10R2 "Books and Records Retention/Destruction"
IC 77-9R "Books, Records and Other Requirements for Taxpayers Having Foreign Affiliates"
Subsection 230(2) - Records and books
Cases
Ark Angel Foundation v. Canada (National Revenue), 2019 FCA 21
The Foundation, a charitable foundation, received most of its revenues from three other registered charities (including the Humane Society of Canada Foundation) that were dominated by the same individual, and disbursed most of those revenues to those three charities, except that it paid approximately 1/3 of its revenues to the individual. Woods JA found that the failure of the Foundation to provide any records that substantiated the basis for the consulting fees justified the CRA’s decision to revoke the Foundation’s registration under s. 168(1)(e) (failure to maintain adequate records) and also on more substantive grounds under s. 168(1)(b) (failure to establish that the consulting services fees representing the devotion of Foundation resources to charitable activities).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 168 - Subsection 168(1) - Paragraph 168(1)(e) | revocation for failure to have records substantiating consulting fees paid to director | 333 |
| Tax Topics - Income Tax Act - Section 168 - Subsection 168(1) - Paragraph 168(1)(b) | failure to demonstrate that consulting fees paid to director were for charitable activities | 289 |
Prescient Foundation v. Canada (National Revenue), 2013 DTC 5101 [at at 6044], 2013 FCA 120
The appellant ("Prescient") and several other registered charities were intermediaries in a series of transactions (the "Farm Sale Transactions"), such that charitable receipts were generated on what was essentially a private sale of business assets. It also donated $500,000 to a non-qualified donee ("DATA"), a registered US non-profit organization whose principal mission was to alleviate property and disease in Africa. Mainville JA found that the donation to DATA was not grounds for revoking Prescient's charitable registration, but the Farm Sale Transactions were.
Mainville JA also agreed with the Minister's alternative argument that Prescient's charitable registration could be revoked because Prescient failed to maintain adequate records. In particular, the question was whether the Minister had acted reasonably given that charitable foundations are generally issued a warning regarding record-keeping lapses before their registrations are revoked. Mainville JA stated (at para. 56):
Though Prescient was remiss in maintaining proper records of the Farm Sale Transactions, the CRA auditor was nevertheless supplied with a considerable amount of information concerning these transactions which allwed her to understand both their scope and their nature. In my view, it would not have been reasonable for the Minister to revoke Prescient's registration on that basis alone. On the other hand, Prescient's failure to maintain adequate records and books of account showing that its contribution to DATA was made to an American charity, coupled with its failure to voluntarily and promptly disclose this fact to the auditor, constitutes a very serious matter.
Taking both failures together, Mainville JA concluded that the Minister's decision had been reasonable.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 149.1 - Subsection 149.1(1) - Charitable Foundation | 355 | |
| Tax Topics - Income Tax Act - Section 149.1 - Subsection 149.1(1) - Related Business | 127 |
See Also
Promised Land Ministries v. The Queen, 2019 TCC 145, 2019 TCC 282
After poor record-keeping was identified on audit, a registered charity (PLM) entered into a compliance agreement with CRA. In a follow-up desk audit of a subsequent PLM taxation year, CRA asked for receipts to support expenses shown for missions to Africa and Europe (mostly, Poland, the pastor’s country of origin). After no receipts were provided (but with protestations that with improved accounting help such deficiencies would no longer occur), CRA determined to suspend PLM’s receipting privileges and qualified donee status for one year pursuant to s. 188.2(2)(a). At the Notice of Objection stage, PLM provided some documentary support for about half of the mission expenditures.
In rejecting PLM’s submission that a one-year suspension was too harsh a consequence in the circumstances, Lyons J found (at para. 66) that the pastor’s “explanation regarding the inability or difficulty of obtaining and tracking receipts in cash economies as self-serving” and noted that the respondent had suggested he could have acquired “a voucher book and he could have obtained a signature, and other details, from the individual PLM dealt with to see how the money was spent.”
She concluded (at para. 73):
[T]he breach justifies the lesser sanction of the Suspension especially since there has been repeated non‑compliance involving receipts for expense amounts for activities outside Canada, it could only account for half of such expenses and the production of documentation and such receipts were not timely and the fact remains that PLM has still not produced all such receipts … .
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 188.2 - Subsection 188.2(2) - Paragraph 188.2(2)(a) | registered charity responsible for generating receipts for mission work in 3rd world “cash economies” | 259 |
Subsection 230(2.1) - Idem, lawyers
Cases
Thompson v. Canada (National Revenue), 2013 DTC 5146 [at at 6296], 2013 FCA 197, rev'd 2016 SCC 21
In finding that a lawyer's list of client names were not automatically protected by solicitor-client privilege, Trudel JA also disagreed with the taxpayer's arguments that client names are not part of a lawyer's accounting record, and that client names are as privileged as statements of account. She stated (at para. 57):
Statements of account are not the same as a lawyer's accounting records. The latter consist essentially of statements of fact such as the name of the client, the amount billed for the professional services, the payments received and the amounts still owed. Statements of account, by contrast, may reveal a history of the file. They may contain information including the nature of the consultation, a summary of communications between solicitor and client, and so on, which may be covered by solicitor-client privilege.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Solicitor-Client Privilege | clients' names not generally privileged | 151 |
Subsection 230(3) - Minister’s requirement to keep records, etc.
Cases
R. v. McKinlay Transport Ltd., 87 DTC 5438 (S.C.O.)
Books and records were not inadequate by virtue only of the fact that they were kept at the Michigan premises of an American holding company.
Subsection 230(4) - Limitation period for keeping records, etc.
See Also
Hill Fai Investments Ltd. v. The Queen, 2015 DTC 1158 [at at 1012], 2015 TCC 167
The taxpayer claimed a capital loss for its 2006 taxation year for loans, which it alleged it had made to its subsidiary and had reported in its 1994 balance sheet. Lamarre J found that there was insufficient evidence that the loans had been made, and dismissed the taxpayer's appeal.
She also dismissed the taxpayer's alternative argument that it should not be required to retain records beyond a six-year period which commenced running from the end of 1994. The reasons in Tibilla applied, so that the taxpayer "was therefore required to keep the relevant records for six years starting from the end of its 2006 taxation year" (para. 66).
Tibilla v. The Queen, 2013 DTC 1174 [at at 946], 2013 TCC 215, aff'd 2014 DTC 5125 [at 7322], 2014 FCA 227
The taxpayer bought a property in November 2002 for $172,000 and sold it for $285,000 in December 2007. The taxpayer claimed that his costs should be increased by $52,000 of renovation expenses expended in 2002, but Lamarre J agreed with the Minister that the taxpayer had insufficient evidence to support that such a renovation had taken place.
The taxpayer argued that his lack of records should not prejudice his case because the renovations took place more than six years before the hearing. Lamarre J stated (at para. 38):
[E]ven though the expenses were incurred in 2002, the last taxation year to which the vouchers relate is the year in which the appellant claimed the expenses in order to reduce his capital gain, which he realized in 2007. Therefore, the vouchers could not be destroyed until the later of the expiration of six years after 2007 (subsection 230(4)) and the date on which his appeal is finally disposed of (subsection 230(6)).
Administrative Policy
11 May 2015 External T.I. 2014-0548841E5 - Retention of Books and Records
In response to a question concerning the interaction between the general requirements with respect to the retention of books and records in s. 230(4) and the specific requirements of Reg. 5800, CRA stated:
[P]aragraph 230(4)(b)…provides that a corporation's non-permanent records (i.e. the books and records referred to in paragraph 5800(1)(b) of the Regulations), must generally be retained for a period of six years from the end of the last taxation year to which the books and records relate, unless an exception in subsections 230(5) to (8) applies. Contrary to your view, these "non-permanent" records of the corporation are not required to be kept from the date of incorporation, rather they may be destroyed after the six-year retention period required by 230(4)(b). It should be noted that, a dissolved corporation is required to retain the non-permanent records referred to in paragraph 5800(1)(b) that it has on hand in accordance with the six-year retention as per above for two further years from the date of dissolution.
14 June 2013 External T.I. 2012-0461301E5 F - Retention of books and records
In response to a general inquiry respecting the inter-relationship between ITA s. 230(4) and Reg. 5800(1), CRA paraphrased s. 230(4), and Regs. 5800(1)(a) and (b), and stated (TaxInterpretations translation):
Therefore, a dissolved corporation must retain for a period of two years following its dissolution the Books and Records which it already was required to retain for a period of 6 years under ITA paragraph 230(4)(b).
Thus, a Book or Record contemplated by Reg. paragraph 5800(1)(a) must be retained until the expiration of two years following the dissolution of a corporation without regard to the retention period of 6 years contemplated in ITA paragraph 230(4)(b). A Book or Record which is not so contemplated must instead be retained until the expiration of 6 years from the end of the taxation year to which it relates, unless it relates to a dissolved corporation, in which case it must be retained for two years from the corporation's dissolution.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Regulations - Regulation 5800 - Subsection 5800(1) | Reg. 5800(1)(a) doc must be retained 2 years' after dissolution without regard to 6-year period | 157 |
| Tax Topics - Income Tax Act - Section 230 - Subsection 230(4) - Paragraph 230(4)(a) | generally only the GL rather than ancillary journals or back-up are subject to the extended corporate accounting-record retention period under s. 230(4)(a) | 279 |
Paragraph 230(4)(a)
Administrative Policy
14 June 2013 External T.I. 2012-0461301E5 F - Retention of books and records
The various records or books of account of a corporation described in Reg. 5800(1)(a) are required pursuant to s. 230(4)(a) to be kept until two years after its dissolution, whereas other records or books of the corporation, referred to in s. 230(4)(b), need only by kept until six years after the taxation year to which they relate.
Regarding the scope of Reg. 5800(1)(a)(iv), which refers to “the general ledger or other book of final entry containing the summaries of the year-to-year transactions of a corporation,” CRA indicated that:
In general, the term “summary” refers only to the summary items posted to the general ledger (GL), so that more details, such as the names of the parties and the dates of the transactions, are not required.
However, in some cases, the GL may present only a total for several transactions otherwise presented individually in another book of final entry, such as a subsidiary ledger, in which case such subsidiary ledger is also subject to the longer retention period.
Notwithstanding some ambiguity in this regard arising under the wording of ITA s. 230(4)(a). the vouchers and accounts required to verify the information contained in the GL are only subject to the shorter (six-year) retention period.
Reg. 5800(1)(a)(v) refers to “any special contracts or agreements necessary to an understanding of the entries in the [GL]”. CRA stated:
Generally speaking, we are of the view that a special contract or agreement is one that includes particular provisions or conditions that are not generally found in a contract or agreement of a similar nature.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 230 - Subsection 230(4) | relationship between 2-year post dissolution and 6-year hold tests | 157 |
| Tax Topics - Income Tax Regulations - Regulation 5800 - Subsection 5800(1) | Reg. 5800(1)(a) doc must be retained 2 years' after dissolution without regard to 6-year period | 157 |
Subsection 230(4.1) - Electronic records
Administrative Policy
17 July 2014 External T.I. 2014-0526121E5 - Electronic records
An individula intends to store electronic images of all relevant information (including receipts) respecting past income tax filings on an electronic storage device and destroy the original paper records. CRA stated:
[T]axpayers may choose to maintain their books and records electronically… . While…CRA… encourages taxpayers to keep original documents, … a person's statutory requirement to keep books and records can be met provided the content and the quality of the electronic image is sufficient to enable the taxes payable to be determined. … Although the guidance in [IC 05-1R1]… is generally intended to be used by businesses and other organizations, some of the guidance is relevant for individual taxpayers. In particular, please see paragraph 25.
…[A]ppropriate and sufficient steps to protect and maintain their records… should include keeping appropriate backup copies.
IC 05-1R1 "Electronic Record Keeping" June 2005
23. When original source documents and records are in an electronic format, they must be kept in an electronically readable format even if they have been transferred to another medium such as microfilm. …
25. Electronic image means the representation of a source document that can be used to generate an intelligible reproduction of that document, or the reproduction itself. In the case of paper source document an intelligible reproductions means that:
- the reproduction is made with the intention of standing in place of the source document;
- the interpretation of the reproduction, for the purposes for which it is being used, gives the same information as the source document; and
- the limitations of the reproduction (e.g., resolution, tone, or hues) are well defined and do not obscure significant details.