Re-Appropriating Statute-Barred Credits – The CRA Gets It Wrong Again

The CRA's unfair policies concerning re-appropriating statute-barred credits were dealt another blow by the Federal Court ("FC") in Pomeroy's Masonry Limited (2017 FC 952).  The FC allowed the taxpayer's application and sent the matter back to the CRA for redetermination because the CRA failed to consider all of the relevant circumstances. 

Background

The taxpayer did not file timely T2 tax returns for 2006 through 2010 and the CRA arbitrarily assessed tax for 2006 through 2008 pursuant to ss. 152(7) of the Income Tax Act (Canada) ("ITA").  The assessed tax was collected by way of payments by the taxpayer and garnishments.  In 2011, the taxpayer hired an accountant and filed the previously unfiled returns, resulting in credits for 2006 through 2008.  Unfortunately, the refund of those credits was barred by ITA ss. 164(1) because the T2 returns were filed more than three years late.  In the meantime, the CRA further reassessed the taxpayer for GST/HST, creating