If a person does not keep adequate books and records, subsection 230(3) of the Income Tax Act allows the Minister to specify what books and records have to be kept. If the Canada Revenue Agency (CRA) finds that the books and records are inadequate, the CRA will ordinarily request a written agreement that books and records be maintained as required. The CRA will follow up the request by letter or visit within a reasonable period of time (usually not less than a month) to make sure the person complies.

If the person does not abide by the request within the time allowed, the CRA will send a formal requirement letter. The letter describes the information to be recorded in the books and describes the legal consequences and penalties for not complying.

If a person does not provide any information or documents, including books and records, section 231.2 of the Income Tax Act specifies that the Minister can require the person to give the information or documents requested.

If a person does not maintain adequate books and records or give the information or documents under section 231.2, such action may result in the CRA prosecuting that person. On a summary conviction, and in addition to any penalty otherwise payable, a taxpayer may be imprisoned and/or fined for not less than $1,000.

Alternatively, under section 231.7 of the Income Tax Act the Minister may apply to the court for a Compliance Order in which a judge would order the person to provide any access, assistance, information or document that the Minister wants under section 231.1 or 231.2. If a person does not conform or refuses to comply with an order, a judge may find the person in contempt of court, and the person could face the processes and the punishments of the court to which the judge is appointed.

If you are audited and cannot support the information we request, we may assess you based on the information we have, which could be to your disadvantage.

For more information, see Information Circular IC78-10R5, Books and Records Retention/Destruction.

Forms and Publications

• Information Circular IC78-10R5, Books and Records Retention/Destruction