Published: April 17, 2020
Last Updated: May 4, 2021
CRA to accept rectification, where the purpose of the order is to put into effect the original intention of the parties
The position of the Canada Revenue Agency (Canadian income tax department) is that they will accept a court ordered rectification order of a transaction where the purpose of the order is to put into effect the original intention of the parties.
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."
Cra To Accept Rectification FAQ's
The elements or requirements for rectification are the following: a prior agreement; a common intention to avoid tax; the final document did not properly record the common intention of the parties; and a common or mutual mistake. Recognizing this, rectification may also be pursued in respect of unilateral mistakes.
The CRA will not issue rectification or relief from mistake orders if such orders involve retroactive tax planning. Rectification is not a “cure for all” for mistakes made in tax matters, nor is it intended to allow taxpayers to “undo” or “re-order” transactions or engage in retroactive tax planning.
The CRA will oppose a rectification application if: it is not informed in advance about the application; it determines that the taxpayers do not have evidence as to the taxpayers’ initial intention or do not have evidence to show that there was not another intention; in the CRA’s view, the taxpayers are not asking the court to rectify the transaction back to the intended form, but to undo the intended transaction and put in place a new one formed after the original transaction; or if the CRA believes that the taxpayers are seeking rectification in order to influence a tax appeal.