Protocol between the Appeals Branch and the Compliance Programs Branch of the Canada Revenue Agency

The purpose of this protocol is to help ensure that tax issues are resolved at the audit stage in full consideration of relevant information. CRA auditors strive to maintain an open dialogue with taxpayers throughout the process to ensure timely resolution and minimize costly and time-consuming appeals. When information is not made available, it undermines the value of audit proposals and reassessments.

This protocol outlines the roles and responsibilities of appeals officers and auditors in the resolution of objections to (re)assessments resulting from audit activities and sets out the referral process in the following Compliance Program areas:

• Small and Medium Enterprises Directorate (SMED)
• International and Large Business Directorate (ILBD)
• GST/HST Directorate (GST/HST)
• Offshore Compliance Division
• Scientific Research and Experimental Development Directorate (SRED)

In addition, it further clarifies timelines, service standards and communication between the Divisions.

Context

Taxpayers are entitled to fair treatment in all their dealings with the Canada Revenue Agency (CRA), including the right to dispute an assessment resulting from an audit. For every valid Notice of Objection received, the CRA is bound to reconsider the assessment and render a decision by conducting a fair, impartial and independent review of any disputed (re) assessment. This involves the review of the relevant issues, providing the taxpayers with an opportunity to explain their interpretation of the law and facts, researching the issue and applicable law, and finally, providing a decision based on the impartial review of the law and the facts.

An appeals officer handling an objection has complete decisional independence relative to the recommendation to confirm, vary or vacate the assessment, or make a reassessment. Appeals officers will keep taxpayers/registrants informed of any discussions with auditors in the course of resolving the objection to ensure that the process is fair, open and transparent.

Referrals from the Appeals Division to the Audit Division

During the course of resolving an objection, an objector/authorized representative may provide additional documents not provided/produced at the audit stage. If this new/additional information is substantial, the appeals officer may consider referring the information back to the Audit Division in order for them to perform audit work and provide a recommendation to the appeals officer.

Outlined below are the circumstances when a referral back to the Audit Division will be discretionary or mandatory:

Mandatory referrals:

Other than for the GST/HST Refund Integrity Program, where specific documents or information that had been requested by the Audit Division are only being provided at the objection stage, the referral is mandatory.

Discretionary referrals:

Situations where a referral may be necessary include, but are not limited to:

• Where the net tax was estimated due to insufficient books and records;
• Where input tax credits were disallowed as the accounting records/documentation were not provided;
• Where the new information available for review is substantial;
• Where an on-site visit is warranted;
• Where the objection relates to an initial assessment concerning issues of prior years’ returns currently being considered by the Audit Division.

Roles and Responsibilities of Appeals Officers and Auditors

In considering any objection, the Appeals Officer:

• Will perform an impartial review of all the information available;
• May contact the auditor, when the appeals officer considers it necessary, to better understand the facts and basis of the assessment;
• Will advise the objector/authorized representative of any discussions with the auditor and/or referral to Audit, and provide copies of the records of these discussions;
• If a referral to the Audit Division is warranted:
  • obtain management approval;
  • consider the recommendations provided by Audit Division;
• Will explain to the objector/authorized representative the decision reached by the Appeals Division.

The Auditor will:

• Upon completion of the audit, ensure that the audit report contains a clear reference to the requested documents that were not received during the audit stage; 
• During the objection stage:
  • Explain the basis of the assessment when required to do so by the appeals officer;
  • Attend meetings with the appeals officer, when requested to do so;
  • Upon assignment of a referral from the Appeals Division to the Audit Division:
    • Acknowledge receipt of the referral to the appeals officer;
    • Inform the appeals officer if contact with the objector/authorized representative is required;
    • Review the additional information provided and complete the work within the established timeframe;
    • Make a recommendation to the Appeals Division, who will discuss the results of their review with the objector/authorized representative; and
    • If new issues are raised during this review, identify those separately in the recommendations.

When the review results in a possible (re)assessment, the auditor is not to proceed with the adjustments. They are to provide the results of their findings to the Appeals Division for final decision.

Timeframes on Referrals to the Audit Division:

The Audit Division is to ensure that the Appeals referral work is assigned as priority workload.

Once a referral from the Appeals Division has been received, the Audit Division will advise the appeals officer, within 30 days, of the name of the auditor that has been assigned the review and establish a reasonable timeframe for completion.

The Appeals Division will conduct follow-ups every 30 days.

Unanticipated delays will be handled through discussions between Appeals and Audit Management.

A review of this protocol will be conducted on an annual basis.