CPABC in Focus November/December 2013 | Page 27

5. Disclosures may involve many years of
unreported amounts. If taxpayers are
contemplating making a disclosure, they
should be aware of certain statutory limits
on the CRA’s authority to waive penalties
and interest. Specifically, the CRA can
waive penalty or interest charges provided
the taxpayers request the waiver less than
10 years after the end of the taxation year
in which the penalty or interest arose; the
CRA cannot, however, waive any penalty
that is mandatory if it is more than 10
years old, or waive interest charges that
are more than 10 years old.
For example, assume that “Jones” has an
offshore bank account, has not reported
the income from the account for the last
15 years, and has not reported the account
on a T1135. Jones now voluntarily discloses
this information to the CRA. The penalties
for failure to file an information return in
subsection 162(7) of the Income Tax Act
(Act) are mandatory. The CRA cannot
waive penalties for years more than 10 years
previous, so Jones will be liable for this
penalty for failing to file T1135s for five of
the 15 years in question.
Jones will also be liable for the interest
on his tax debts for those five years. In the
past, the CRA would not have waived
interest on any debt that arose more than
10 years earlier; instead, it would have
charged interest to Jones on unpaid taxes
and penalties that began accumulating
more than 10 years earlier, up to the present
day. Now, however, the CRA will waive
interest relating to the years during which
the interest accrued; therefore, it can waive
or reduce all of the interest accumulated
within the last 10 years.
6. Appendix E of CRA’s internal VDP
guidelines referred to earlier contains a
complete list of discretionary and mandatory penalties. The gross negligence
penalty in subsection 163(2) and the
penalty in subsection 162(10) for failure
to furnish foreign-based information are
discretionary. Therefore, in the case of
“Jones,” the CRA will choose not to assess
these penalties for all 15 of the years in
accordance with the VDP policy.

7. Taxpayers often ask how far back the CRA will go—in other words, how many years of
delinquencies must be disclosed. The current CRA policy is to require disclosure for all
years for it to be considered “complete.” This can create problems for disclosures dating back
more than 10 years, because, again, the CRA cannot waive interest or mandatory penalties
going back more than a decade.
Asking the CRA to accept disclosure only for the years for which records are available may
provide a solution. Taxpayers do not always have records going back beyond 10 years. In such
cases, taxpayers may submit a no-names disclosure asking the CRA to agree to only assess the
years for which records are available, and to accept disclosure for these years as “complete.”

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