Remission Orders: Relief When the Tax Result Is Unjust

Subsection 23(2) of the Financial Administration Act allows the Governor in Council (the federal Cabinet), on the recommendation of the appropriate Minister, to remit any tax, fee or penalty, including interest, when it considers that collecting it is unreasonable or unjust, or that remission is otherwise in the public interest. Remission can cancel amounts already assessed or refund amounts already paid.

Unlike an objection or appeal, remission does not depend on showing the CRA made an error. It recognizes that rigid application of tax law can, in rare situations, produce outcomes Parliament did not intend.

Requests are reviewed by the CRA's remission committee, which considers established guidelines before making a recommendation. Remission is generally considered where one or more of the following factors is present.

Remission is not a substitute for objections, appeals or taxpayer relief requests. The CRA will generally expect you to have pursued other available remedies first. For example, where the issue is only penalties and interest, the taxpayer relief provisions under subsection 220(3.1) of the Income Tax Act are usually the first step, with judicial review in the Federal Court if a relief request is unreasonably denied.

Unlike taxpayer relief, remission can cancel the tax itself, not only penalties and interest. That makes it particularly important in cases involving unintended tax results, such as a benefit clawback or a tax caused by reliance on incorrect government advice.

Remission requests are decided on written submissions. The strongest requests explain the facts chronologically, document every claim of hardship or reliance, show why other remedies are unavailable or have been exhausted, and connect the circumstances to the recognized remission factors. For hardship cases, detailed financial disclosure is usually required.

Remission decisions are discretionary and can take considerable time. Collection action may continue while a request is pending, so we also address payment arrangements or collection holds where appropriate. A refusal by the Minister to recommend remission may, in some circumstances, be challenged by judicial review.

Remission has been granted, by individual and by general remission orders, in a range of situations. General orders have addressed groups of taxpayers affected by the same problem, for example where a benefit or credit was clawed back because of a payment that was reported in the wrong year through no fault of the recipient, or where a government program produced an unintended tax result. Individual orders have addressed cases of severe hardship, reliance on incorrect information from the CRA, and situations where a taxpayer was taxed on income that was later repaid or never actually received.

Each request is assessed on its own facts, and there is no entitlement to remission. The CRA's remission committee reviews the request and the supporting evidence, and a recommendation is made before any order is granted. Requests that simply argue the tax is too high, or that repeat arguments rejected in an objection or appeal, are unlikely to succeed. Requests that show a genuine injustice, carefully documented and connected to the recognized factors, have the best chance.

Because remission can take a long time, it is important to consider interest and collection while a request is pending. Interest generally continues to accrue on unpaid amounts, and the CRA is not required to suspend collection. We advise on whether to pay the disputed amount, seek a payment arrangement, or request a collection hold while the remission request is considered, so that the remedy is not overtaken by enforcement action.