CRA's Audit Powers Restricted - BP Canada

On March 30, 2017, the Federal Court of Appeal ("FCA") rendered a taxpayer-friendly decision in BP Canada Energy Company ("BP") with important implications for companies required by law to prepare audited financial statements. In brief, the FCA held that the CRA's audit powers do not authorize general and unrestricted access to a corporation's tax accrual working papers ("TAWPs").

As a publicly traded company, BP was required to prepare audited financial statements in accordance with GAAP.  This included evaluating potential liability for future tax exposures and establishing related financial reserves as necessary. The underlying tax analysis is described as TAWPs:  accounting documents contemplating uncertain tax positions taken in tax returns and opinions on the likely outcome if the CRA challenged the filing position.  The dispute before the Courts started with a CRA audit during which the CRA sought copies of BP's TAWPs.  Obviously, from the CRA's perspective,