Published: August 14, 2026
Overview: Federal Court or Tax Court, Which One Applies?
A CRA refusal is not always something that can be challenged through the normal tax objection and appeal system. The first question is usually whether the taxpayer is disputing a discretionary CRA decision, which may be reviewed by the Federal Court, or disputing the correctness of a tax assessment, which generally belongs in the Tax Court of Canada.
Which CRA Decisions Are Discretionary?
Many CRA decisions are discretionary. Examples include refusals to cancel penalties or interest under subsection 220(3.1) of the Income Tax Act, refusals to accept late, amended, or revoked elections under subsection 220(3.2) of the Income Tax Act, refusals under the Voluntary Disclosures Program, and certain waiver decisions involving filing requirements. We cover several of these in more depth elsewhere, including judicial review of a denied taxpayer relief application, the general principles governing judicial review of CRA discretionary decisions, and the Federal Court’s treatment of CRA processing delays in Maloney v. Canada (Attorney General), 2024 FC 1474.
As David J. Rotfleisch puts it, “A CRA refusal is not always the end of the road, but the taxpayer must choose the right path. If the issue is discretion, the remedy is usually judicial review, not a tax appeal.”
When Judicial Review Is Available
The Income Tax Act gives the CRA broad administrative powers. Subsection 220(1) makes the Minister of National Revenue, acting through the CRA, responsible for administering and enforcing the Act, and subsection 220(2.01) allows delegation of many powers to CRA officials. Some powers are expressly discretionary. For example:
- Subsection 220(3.1) of the Income Tax Act allows the Minister to waive or cancel all or part of a penalty or interest within the statutory time limits.
- Subsection 220(3.2) of the Income Tax Act allows the Minister to extend the time for certain elections or permit amendments or revocations.
- Subsection 220(2.1) of the Income Tax Act allows the Minister to waive certain filing requirements in appropriate cases.
Where CRA refuses relief under these provisions, there is generally no right of objection or appeal against the discretionary refusal itself. Instead, the taxpayer may seek an internal second administrative review and then apply to the Federal Court for judicial review. The jurisdictional source is section 18.1 of the Federal Courts Act, which gives the Federal Court authority to review discretionary decisions of the CRA and its delegated officials. A taxpayer relief decision is not an assessment, so there is nothing for the Tax Court of Canada to hear.
When Judicial Review Is Not the Right Remedy
Judicial review is not a substitute for disputing a tax assessment on its merits. CRA guidance states that taxpayer relief provisions are not meant to be used as an indirect way to challenge the correctness of a tax assessment, especially where the taxpayer could have objected or appealed through the normal process. See CRA Publication IC07-1R1.
That jurisdictional line is important. Recent litigation involving Iris Technologies Inc. v. Canada, 2024 SCC 24 and Dow Chemical Canada ULC v. Canada, 2024 SCC 23 concerns whether a taxpayer is truly challenging ministerial conduct or is really making a collateral attack on a tax assessment. In Iris, the Federal Court of Appeal treated the application as a collateral challenge to the validity of tax assessments belonging to the Tax Court rather than the Federal Court, and the Supreme Court of Canada affirmed that result.
Dow points the other way on the facts and is the more consequential holding for jurisdiction: the Supreme Court held that the Minister’s discretionary decision under subsection 247(10) of the Income Tax Act is not part of the assessment itself, so it is reviewable in the Federal Court and not appealable to the Tax Court. Read together, the two decisions confirm that jurisdiction turns on whether the taxpayer is attacking an exercise of discretion or the assessment that follows from it. Our Canadian tax lawyers analyze both rulings in detail in what the Tax Court decides and what the Federal Court decides after Dow Chemical and Iris Technologies.
As David J. Rotfleisch explains, “The court will look past the label on the application. If the real complaint is that the tax assessment is wrong, the taxpayer usually belongs in the Tax Court, not in judicial review.”
Grounds for Judicial Review
Generally, a judicial review application does not ask the Federal Court to decide the taxpayer’s relief request all over again. Instead, the Court looks at whether the CRA properly exercised its discretionary power. The main question is usually whether the CRA acted lawfully, fairly, reasonably, and in good faith, while giving proper attention to the taxpayer’s circumstances.
The Federal Court reviews the legality and fairness of the decision-making process. It does not simply ask whether the judge would have reached a different result. Common grounds for judicial review may include:
- failure to consider relevant facts or documents;
- reliance on irrelevant considerations;
- misunderstanding important facts;
- procedural unfairness;
- inadequate reasons for the refusal;
- fettering of discretion, meaning the CRA mechanically applied an internal policy such as the extraordinary-circumstances examples in IC07-1R1 as if it were a binding rule, rather than weighing the taxpayer’s individual circumstances; and
- a decision that is inconsistent with the purpose of the statutory discretion.
The Standard of Review After Vavilov
The Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, fundamentally reshaped Canadian administrative law.
Today, most CRA discretionary decisions are reviewed using the reasonableness standard. This means the Court asks whether the decision is justified, transparent, intelligible, and supported by the applicable facts and law. The Court does not interfere simply because it might have reached a different conclusion.
Only in limited situations will the Court apply the stricter correctness standard, such as certain constitutional questions or issues that the law specifically requires to be decided correctly. Vavilov also held that where the legislature has provided a statutory right of appeal, the reasonableness presumption is displaced and the court applies appellate standards instead, reviewing questions of law for correctness. That distinction matters here: a Tax Court appeal from a tax assessment is a statutory appeal, while judicial review of a discretionary CRA refusal is not. The choice of forum therefore changes not only where the taxpayer goes but how closely the decision will be scrutinized.
Procedural Steps Involved in Judicial Review
The usual procedural steps involved in judicial review are:
- The taxpayer requests the discretionary relief from CRA, usually with supporting facts and documents.
- If CRA refuses, the taxpayer asks for a second administrative review. CRA policies generally encourage this before going to court.
- If the refusal stands and it represents the final discretionary decision, the taxpayer files an application for judicial review in the Federal Court under section 18.1 of the Federal Courts Act within 30 days after receiving the decision, subject to any extension the Court may allow.
- The application for judicial review is generally commenced using Form 301 – Notice of Application, with the required filing fee paid.
Two procedural features matter more than most taxpayers expect. First, under Rule 317 of the Federal Courts Rules, the applicant may request the certified record of the material that was before the CRA decision-maker. That record often reveals the internal notes and policy references that explain why relief was refused, and it is frequently the most valuable step in the entire application. Second, judicial review is decided on that record.
Evidence the taxpayer never put before the CRA is generally inadmissible, which is why the submissions made at the first and second review stages effectively determine what the Federal Court is allowed to see.
If the taxpayer succeeds, the Federal Court generally cannot substitute its own decision. Subsection 18.1(3) of the Federal Courts Act sets out what the Court can do: it may quash the decision, or set it aside and refer the matter back for redetermination in accordance with directions the Court considers appropriate. Those directions matter, because a remittance with directions constrains how the CRA may decide the second time and is a materially better outcome than a bare referral back to another delegated official.
As David J. Rotfleisch notes, “Winning judicial review usually means getting a fair second chance, not getting the relief outright. The court sends the matter back and requires CRA to decide again properly.”
Implications for Canadian Taxpayers
The practical consequence of all of this is that a judicial review application is won or lost long before it is filed. Because the Federal Court reviews the record that was before the CRA, the taxpayer’s first and second relief submissions are the evidentiary case. Medical records, correspondence showing CRA delay, proof of financial hardship, and a clear chronology all need to be in front of the CRA officer at the review stage, not produced later for the Court.
Timing is equally unforgiving. The thirty-day clock in subsection 18.1(2) of the Federal Courts Act runs from the day the decision is communicated to the taxpayer, not from the day the taxpayer decides to act on it. An extension is possible but discretionary, and a taxpayer who spends those thirty days filing in the wrong forum will usually have to seek one.
Cost is the third consideration. Costs in the Federal Court are governed by Rule 400 and are generally modest relative to the amounts in dispute, but they are real, and an unsuccessful applicant may be ordered to pay them. Because the usual remedy is a fresh CRA decision rather than the relief itself, a taxpayer should weigh the realistic value of a second, properly conducted review against the cost of getting there. Where the amount at stake is significant, or the CRA’s reasons show a policy applied mechanically, that calculation usually favours proceeding.
Takeaway: When Is Judicial Review the Right Option?
Judicial review is generally the proper remedy when the CRA refuses discretionary relief and no statutory objection or appeal is available. The key is to identify the issue properly. If the dispute is about the CRA’s exercise of discretion, including whether the decision was lawful, procedurally fair, and reasonable, review by the Federal Court may be available. If the dispute is really about the correctness or validity of a tax assessment, the proper route is usually an objection and appeal to the Tax Court of Canada. Timing, supporting evidence, and careful framing of the issue are critical.
PRO TAX TIP: Know Which Court Has the Power to Hear Your Case
Before challenging a CRA decision, determine whether you are disputing a discretionary decision or the correctness of a tax assessment. Filing in the wrong court can waste valuable time and may cause you to miss important legal deadlines. The thirty-day deadline in subsection 18.1(2) of the Federal Courts Act runs from the day the CRA communicates its decision, and starting a proceeding in the wrong forum does not stop that clock.
Judicial review is generally for discretionary CRA decisions, while disputes over tax assessments usually belong in the Tax Court of Canada. Taking the correct legal route from the beginning greatly improves your chances of obtaining the appropriate remedy. Our experienced Canadian tax lawyers can review the CRA decision, determine the proper legal process, and ensure that your case is started in the correct court within the applicable limitation period.
Frequently Asked Questions
What Is Judicial Review?
Judicial review is a legal process in which the Federal Court examines how a government decision was made. Generally, the Court does not decide whether it personally agrees with the CRA’s conclusion; instead, it determines whether the CRA acted within its legal authority, followed a fair process, considered the relevant evidence, and reached a decision that can reasonably be justified.
Unlike a tax appeal, judicial review is not a new hearing on the merits. New evidence is generally limited, and the Court does not simply substitute its own opinion for that of the CRA. If the Court finds the decision unreasonable or procedurally unfair, the usual remedy is to set aside the decision and send the matter back to a different CRA decision-maker for reconsideration.
How can a taxpayer challenge a CRA taxpayer relief decision?
A taxpayer generally cannot file a notice of objection to challenge a taxpayer relief decision under subsection 220(3.1) of the Income Tax Act. The usual recourse is to ask for a second administrative review within the CRA and, if still unsuccessful, apply to the Federal Court for judicial review. The application should be brought within 30 days after the decision is received. If the Court finds the discretion was not properly exercised, it usually sends the matter back to the CRA for reconsideration by another delegated official.
How can a taxpayer challenge a Voluntary Disclosures Program decision?
A VDP decision is also generally not challenged by objection or appeal. The normal path is first to request a second administrative review within the CRA. If the taxpayer believes the CRA did not exercise its discretion fairly or reasonably, the taxpayer may then apply to the Federal Court for judicial review, generally within 30 days after the CRA sent the decision. This applies to both the income tax VDP, GST/HST and other indirect tax VDP frameworks.
Can the Federal Court substitute its own decision for the CRA’s decision on judicial review?
Usually, no. Where the Federal Court finds that the CRA did not properly exercise discretion, the normal remedy is not for the Court to make the decision itself. Instead, the Court generally sets the decision aside and refers the matter back to the CRA for reconsideration by another delegated official. This is the standard recourse described for taxpayer relief decisions, VDP decisions, and waiver-to-file decisions.
Can judicial review be used to challenge the validity or correctness of a tax assessment?
Generally, no. A challenge to the validity or correctness of a tax assessment usually belongs in the Tax Court of Canada through the objection and appeal process, not by judicial review in Federal Court. Judicial review is generally for discretionary CRA decisions, not for deciding the correct amount of tax. If a taxpayer frames a judicial review application in a way that really attacks the tax assessment itself, the Court may treat it as being in the wrong forum.
What CRA decisions can be challenged by judicial review?
Judicial review is generally used for discretionary CRA decisions. Examples include decisions to waive or cancel penalties or interest under subsection 220(3.1) Income Tax Act, decisions on late, amended, or revoked elections under subsection 220(3.2), VDP decisions, and certain waivers of filing requirements under subsection 220(2.1). The common feature is that the statute gives the Minister or delegated CRA officials a choice whether to grant relief, rather than requiring a fixed result.
What is the difference between challenging a discretionary decision and challenging the correctness of an assessment?
A discretionary decision challenge asks whether the CRA exercised a legal power fairly, reasonably, and within the limits of the statute. A correctness-of-assessment challenge asks whether the assessed tax, interest, or penalties are legally and factually right. The first type usually goes to Federal Court by judicial review. The second usually goes to the Tax Court through objection and appeal procedures. The Supreme Court’s recent Dow and Iris decisions, earlier cited, reinforce that courts look at the true nature of the dispute, not just the label used by the taxpayer.
What are the statutory time limits for waiving or cancelling penalties or interest under the Income Tax Act?
Subsection 220(3.1) of the Income Tax Act allows the CRA to waive or cancel all or part of a penalty or interest on or before the day that is 10 calendar years after the end of the taxation year, or fiscal period for a partnership. CRA guidance IC07-1R1 adds an important distinction for interest: relief is limited to interest that accrued during the 10 calendar years before the year the request is made. So penalty relief is tied to the year at issue, while interest relief is tied to when the interest accrued.
When is a challenge considered a collateral challenge to the validity of tax assessments?
A challenge is considered collateral when it is framed as a complaint about process, fairness, or CRA conduct, but in substance it is really an attack on the tax assessment itself. In Iris, as earlier cited, claims about procedural fairness and lack of evidentiary basis were treated as attacks on the tax assessments because the real issue was whether the tax assessments denying refunds were valid. Courts look at the true character of the claim, not only the wording used in the application.
What are discretionary decisions, and what words in the law suggest that a CRA decision is discretionary?
A discretionary decision is one where the law gives the CRA official a choice rather than imposing an automatic result. Common signals are words such as “may,” “if the Minister considers it advisable,” “if in the opinion of the Minister,” or provisions saying the Minister may extend time, waive a requirement, or grant permission. For example, subsection 220(3.1) of the Income Tax Act says the Minister “may” waive or cancel penalties or interest, and subsection 220(3.2) says the Minister “may” extend time for certain elections.
What did Vavilov decide about the standard of review in judicial review cases?
In Canada (Minister of Citizenship and Immigration) v. Vavilov, the Supreme Court of Canada established that reasonableness is the presumptive standard of review in judicial review of administrative decisions. A reviewing court should begin by assuming that an administrative decision will be reviewed for reasonableness, reflecting legislative intent that administrative decision-makers interpret and apply the law within their mandates.
This presumption is rebutted only in limited situations, such as where legislation prescribes a different standard, provides for a statutory appeal, or where the rule of law requires correctness review for certain categories of legal questions, including constitutional issues and general questions of law of central importance to the legal system. The Court also emphasized that reasonableness review focuses on whether the administrative decision is justified, transparent, intelligible, and consistent with the applicable legal and factual constraints.
How long does a judicial review of a CRA decision take in the Federal Court?
Most applications take roughly nine to eighteen months from filing to hearing, though the range is wide. The steps that drive the timeline are the Rule 317 request for the CRA’s certified record, the exchange of affidavits and cross-examinations, and the preparation of the applicant’s record. A taxpayer should also budget time for the CRA’s second administrative review beforehand, which can itself take several months. Where the delay is causing hardship, the taxpayer’s Canadian tax lawyer can ask the Court to expedite the matter, but that request is granted sparingly.
How much does it cost to file a judicial review against the CRA?
The filing fee for a notice of application is modest, but the fee is not the real cost. Legal fees depend on the complexity of the record and whether cross-examinations are required. Cost awards in the Federal Court are governed by Rule 400 and are typically a partial contribution rather than full indemnity, so a successful taxpayer usually recovers only a portion of what was spent, and an unsuccessful applicant may be ordered to pay a portion of the CRA’s costs. Because the remedy is generally a fresh CRA decision rather than the relief itself, the cost should be weighed against the realistic value of a properly conducted second review.
Can a taxpayer file a judicial review application without a lawyer?
Yes. A self-represented taxpayer may file an application, and Federal Court staff can explain filing requirements. The difficulty is that judicial review is a technical administrative law proceeding rather than a rehearing of the relief request. The application must identify recognized grounds of review, the argument must be built from the certified record, and the taxpayer generally cannot introduce new evidence to fill gaps. Self-represented applications are frequently dismissed not because the underlying circumstances lacked merit but because the application was framed as a complaint about the outcome rather than about how the decision was made.
Can a taxpayer submit new evidence on judicial review of a CRA decision?
Generally, no. The Federal Court reviews the reasonableness of the CRA’s decision on the record that was actually before the decision-maker. Narrow exceptions exist, for example, evidence going to a breach of procedural fairness or general background that assists the Court without going to the merits. This is the most common and most costly mistake taxpayers make: documents held back during the first and second administrative reviews usually cannot be produced later, so the relief submissions to the CRA should be treated as the evidentiary case.
What is the difference between a trial and a judicial review application?
A trial decides the facts. Witnesses testify in person, they are cross-examined in the courtroom, documents are entered into evidence, and the judge decides what actually happened and who wins on the merits. A Tax Court appeal from a tax assessment works this way: the taxpayer puts forward evidence, and the Court determines the correct amount of tax.
A judicial review application decides whether a decision was made properly. There is no trial, and there are usually no live witnesses. The Federal Court works from a written record consisting of the certified material that was before the CRA decision-maker, affidavits, and any transcripts of cross-examinations on those affidavits, which take place out of court rather than in front of the judge. The hearing itself is argument by counsel, not testimony, and it is often over in a matter of hours rather than days.
The difference in what the Court is being asked to do follows from that. A trial judge asks who is right. A judge on judicial review asks whether the CRA’s decision was reasonable and whether the process was fair, which means the Court can find that a decision was properly made even if the judge would have decided the relief request differently. It also explains the remedy: a successful trial produces a judgment resolving the dispute, while a successful judicial review usually produces an order sending the matter back to the CRA to be decided again.
DISCLAIMER: This article provides broad information. It is only accurate as of the posting date. It has not been updated and may be out-of-date. It does not give legal advice and should not be relied on as tax advice. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.
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