Penalty and Refund Changes

Volume No. 06-34

“Refunds could be unexpectedly withheld.”

The CRA recently sent out a press release highlighting some changes that were mentioned in the recent Budget. They are effective April 1, 2007.

  1. Failure to File Penalty

If a GST/HST return is filed late, there will be a 1% penalty for the unpaid amounts plus 0.25% of the overdue amount for each month that the return is late to a maximum of 12 months.

  1. Refund Hold

Where a taxpayer is expecting a refund from a GST/HST return, the refund will only be sent to the taxpayer if they have filed all their returns for all business accounts.  That is, if there are income returns or other returns outstanding, the refund will not be sent until all tax returns have been filed.

  1. Offset of Refunds

If a refund is expected for a GST/HST return and there are amounts owing under the Income Tax Act or other Tax Acts, the refund or rebate will automatically offset the other amounts.  Therefore, a taxpayer will no longer receive a refund of GST/HST if there are amounts owing for income taxes.

Clients should be made aware of these changes. Otherwise, refunds could be unexpectedly withheld or applied to outstanding balances until tax returns are filed.


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The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.