The case of Canada (National Revenue) v Miller demonstrates that charities and not-for-profits (“NFPs”) should be aware of the CRA’s extensive audit powers, including the power to request a taxpayer to disclose the particulars of unwritten business agreements. The case, decided in the Federal Court by Madam Justice Walker on August 19, 2021, came about in the context of the Minister of National Revenue (the “Minister”) seeking a compliance order requiring a taxpayer, Mr. David Miller, to provide certain documents, records and information to an authorized officer of the CRA.
Mr. Miller was a businessman who engaged in consulting work, including with a client who was based out of Europe (the “European Firm”). Mr. Miller had an oral contract with the European Firm, but no written contract for services and no written invoices for amounts received from them. In 2016, the CRA began an audit of his personal income tax returns for the years of 2007-2015 and subsequently extended the audit to include the 2016 tax year. Throughout 2017 and 2018, Mr. Miller and the CRA auditor engaged in correspondence regarding requests for documents and information. From the end of 2018 to mid-2020, several demand and response letters were exchanged between the Department of Justice (“DOJ”) on behalf of the CRA and Mr. Miller’s representatives from a professional audit and tax firm. The CRA viewed Mr. Miller to be unresponsive and directed the DOJ to begin an application in court on behalf of the Minister.
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