Re-appropriation of T2 statute-barred credits
T2 Re-appropriation additional information
When you file your T2 income tax return more than three years past the tax year-end, any overpayment is considered to be statute-barred for refund purposes under subsection 164(1) of the Income Tax Act. This means that these credits cannot be refunded, regardless of the situation.
However, the Minister may exercise ministerial discretion to allow the re-appropriation of T2 statute-barred credits to established debt within the same business number (BN).
When we consider whether to apply ministerial discretion, we may take the following into consideration:
- Have all of your tax obligations been met for all of your program accounts?
- Is the established debt the result of a subsection 152(7) assessment?
- Is your corporation operational?
Requesting the re-appropriation of T2 statute-barred credits
You can make your request through My Business Account, Enquiries service or by sending us a completed form RC431, Request for Re‑appropriation of T2 Statute‑barred Credits, or a letter. Your request must contain the same details that are requested on Form RC431. Complete a separate form or letter for each unique BN.
Sending Form RC431 or a letter
Send your completed Form RC431 or letter to:
T2 Re-appropriation, Corporate Accounts
Business Returns Division
Winnipeg Tax Centre
66 Stapon Road
Winnipeg, MB R3C 3M2
You can only apply the T2 statute-barred credits that have been approved for re‑appropriation to established debt. The amount re-appropriated cannot be more than the established debt on your BN. For these purposes, established debt means any debt that may be outstanding on any of the following program account numbers associated with a particular BN and administered by the Canada Revenue Agency (CRA):
- Goods and services tax/harmonized sales tax (GST/HST)
- Payroll deductions
- Corporation income tax
- Excise tax
- Insurance premium tax
- Air travellers security charge
- Registered charity
Established debt does not include:
- debt outstanding on another business entity's account (the first nine digits of the business number are different)
- tax debt with a balance due date that is earlier than the filed date of the return that generated the statute-barred credit
- protected balances (such as advanced deposits)
- amounts owing as a result of a subsection 152(7) assessment of a return
The CRA will not refund interim (instalment) payments in order to establish a debt on your BN.
If you have established debt that is less than the amount of your T2 statute-barred credits
If it is decided that ministerial discretion will be exercised to allow the re-appropriation of your T2 statute-barred credits and your established debt is less than the amount of credits available to re-appropriate, we will re-appropriate only the amount needed to reduce your established debt to zero.
The remaining amount of your T2 statute-barred credit will stay on your account until your account has more established debt.
When more debt is established on your account, you can request the re-appropriation of the remaining T2 statute-barred credits to the established debt through My Business Account's Enquiries service or by calling 1-800-959-5525.
Any amount outstanding in excess of the T2 statute-barred credits approved for re‑appropriation will incur interest and penalties.
The following examples illustrate the process.
ABC Company requested the re-appropriation of $20,000 of T2 statute-barred credits on January 1, 2019. Ministerial discretion was exercised to allow the re-appropriation but there was only $6,000 (not including penalties and interest) of established debt on the company's program accounts with a due date of February 28, 2019. The CRA re‑appropriated $6,000 to the established debt using the effective interest date of the credit that created the statute-barred credit. The balance was reduced to zero and the penalties and interest were recalculated to zero. This left $14,000 available to re-appropriate to any established debt in the future.
ABC Company was required to make $2,500 quarterly instalment payments in 2019. The company decided to establish a debt by not making any of their instalment payments or paying the balance due on their T2 return.
When the company filed their T2 return on June 30, 2020, there was a balance owing of $11,000 plus interest and penalties. After ABC Company got their 2019 notice of assessment, the owner made a request through My Business Account's Enquiries service to have the approved T2 statute-barred credits applied to the outstanding balance to cover the quarterly instalments and the balance due. The CRA re-appropriated $11,000 with the effective interest date of the credit that created the statute-barred credit, which reduced the balance owing to zero and the penalties and interest were re-calculated to zero as well.
ABC Company has a $3,000 balance of T2 statute-barred credits available to re-appropriate to any future established debt.
ABC Company requested the re-appropriation of $5,000 of T2 statute-barred credits on January 5, 2019, but there was no established debt at the time.
ABC Company was required to make instalment payments of $2,500 quarterly for the 2019 tax year. The company decided to establish debt by not making any instalment payments or any payment on the balance due date of February 28, 2020.
When the 2019 return was assessed on July 15, 2020, there was a balance owing of $11,000 plus penalties and interest. ABC Company called Business Enquiries at 1-800-959-5525 and requested that the $5,000 of T2 statute-barred credits be re‑appropriated to their outstanding balance for 2019. The CRA re-appropriated $5,000 using the effective interest date of the credit that created the statute-barred credit. However, the $5,000 only covered the first two instalment payments that were not paid.
Interest and penalties were reduced but not to zero; interest and penalties still apply to the following:
- missed instalment due September 30, 2019, of $2,500
- missed instalment due December 31, 2019, of $2,500
- balance outstanding $6,000 due February 28, 2020
ABC Company is responsible for the interest and penalties that apply to the above missed payments.
Debt for which you have filed an appeal or objection
If you would like to re-appropriate the T2 statute-barred credits to a debt for which an appeal or objection has been filed, you will have to wait until the appeal or objection has been resolved before we will apply the credits to the debt.
Once the appeal or objection has been resolved, you can submit your request to re-appropriate the T2 statute-barred credit to the debt. We will then apply the amount to the debt using the effective interest date of the credit that created the statute-barred credit. Interest and/or penalties will be adjusted accordingly. However, you are responsible for any interest and/or penalties owing on the amount of the debt that exceeds the amount of the T2 statute-barred credits available for re-appropriation.
Refunds and refund interest
Refund interest does not apply to any re-appropriations of T2 statute-barred credits and the CRA will not refund any part of a T2 statute-barred credit.
If your request is denied
If you disagree with the CRA's decision, you can request another review by following the steps outlined under Requesting the re-appropriation of T2 statute-barred credits.
If after your second or subsequent review you still disagree with the CRA's decision, you can apply to the Federal Court for judicial review of that decision. For more information go to judicial review.
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