Revised 10-year limitation period for interest relief

The Canada Revenue Agency (CRA) has made a recent policy change to the administration of the 10-year limitation period under subsection 220(3.1) of the Income Tax Act for requesting interest relief for a tax year that ended more than 10 years ago (see the CRA news release, Taxpayer relief deadline is December 31, 2011, dated November 21, 2011).

The change applies to interest relief requests made on or after June 2, 2011. 

On June 2, 2011, the Federal Court of Appeal (FCA) rendered its decision in Bozzer v. Canada. The FCA found that the Minister has the discretion to cancel interest that accrued during the 10 calendar years preceding the year in which the request for relief is made, regardless of the tax year in which the tax debt arose. For example, a request made in December 2011 for the 1998 tax year, the Minister may cancel any interest that accrued during the 2001 to 2010 calendar years. Prior to this decision, the CRA's position was that the Minister could not cancel any interest where the request was made more than 10 calendar years after the end of the tax year in which the tax debt arose (no later than December 31, 2008, for the 1998 tax year).

Please note that the information provided below on the revised 10-year limitation period is specific to interest relief requests. The information on the 10-year limitation period in IC07-1 (paragraphs 12 to 16) still applies, and has not changed, for penalty relief requests; requests to accept certain late-filed, amended or revoked elections; and requests for a refund or reduction in tax payable beyond the normal three year period. For these other types of requests, a taxpayer has 10 years from the end of the relevant tax year to make a request to the CRA for relief.

Limitation period on exercising ministerial discretion and deadline to apply for interest relief

For requests made on or after June 2, 2011, the Minister may grant relief from interest that has accrued during the 10 calendar years before the year in which the request is made for any tax year (or fiscal period in the case of a partnership). Due to this limitation period, a taxpayer has 10 years from the end of the calendar year in which the interest accrued to make a request to the CRA for relief.

The 10-year limitation period rolls forward every January 1. For requests that are made in the current calendar year, the Minister has no authority to cancel interest that accrued in a calendar year that ended more than 10 years before the year in which the request was made. 

Examples: 

• An initial request made during the 2012 calendar year related to any interest that accrued during the 2002 and later calendar years, for any tax year, is eligible for relief. Any interest that accrued during the 2001 and previous calendar years is not eligible for relief.
• An initial request made during the 2013 calendar year related to any interest that accrued during the 2002 and previous calendar years, for any tax year, is not eligible for relief, since those calendar years are beyond the 10-year period. Only interest that accrued during the 2003 and later calendar years is eligible for relief.
• The Minister has no authority to grant relief from the interest that accrued during the 2003 calendar year, for any tax year, unless the taxpayer has made an initial request on or before December 31, 2013.

For requests made before June 2, 2011, that were considered late-filed beyond 10 years after the end of the tax year under the previous interpretation of the limitation period, the CRA may grant relief from the interest that accrued within the last 10 calendar years effective from the 2011 year or the year in which the new request is made, whichever is later. The revised 10-year limitation period will not be applied from the 2010 or prior calendar year in which the initial late-filed request was made.

Accrual of arrears interest

Paragraph 39 of IC07-1 no longer reflects the CRA's current policy and should therefore be disregarded.

For more information about the taxpayer relief provisions, see Taxpayer Relief on the CRA Web site