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ARTICLE · 14 MAY 2026

CRA Settlement After A Reassessment: When Resolution Becomes Unstable

Counter Tax Litigators LLP
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A Tax Court case reveals how settlement agreements can become unstable when institutions attempt to modify terms after acceptance. The dispute centered on whether additional implementation terms could be added...

CanadaTax
Counter Tax Litigators
Counter Tax Litigators
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Key Takeaways

  • The decisive failure in Zhang v. HMK was not mechanical. The CRA lost control of its ability to change the outcome after it accepted a settlement proposal. The taxpayer preserved flexibility by controlling the operative record.
  • The case exposed a recurring institutional dynamic inside large tax disputes: the CRA will continue to pull the file back toward its preferred outcome, even after apparent resolution points have been reached.
  • The same structural risk exists on both sides of a dispute. Businesses that fail to skillfully manage the operational record lose control of the outcome sooner than they expect.

The Situation

In Zhang, the taxpayer appealed GST/HST assessments connected to the sale of reconstructed residential properties. During settlement negotiations, the taxpayer submitted a written proposal addressing the years at issue. DoJ replied to confirm that it agreed with the proposal except for gross negligence penalties. The taxpayer accepted cleanly.

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