Civil Penalties To Third Party Advisers

Post-budget consultation has led the Department of Finance to reconsider the application of the proposed civil penalties to third parties. Revenue Canada will continue to consult with private sector professionals as it acquires experience with these new measures. The new culpable-conduct standard is intended to ensure that civil penalties apply only to third-party advisers who make or participate in making a false statement, and–unlike the budget’s proposed gross negligence test–will prevent an honest error of judgment or an honest difference of opinion from attracting penalties. It is also specified that a penalty is not levied solely because the third party relied in good faith on information provided by another person, for example, to prepare or file that person’s tax return. Explanatory notes contain specific examples of the rules’ application. Revenue Canada indicates that it will assess such penalties only after a Head Office review.