ABOUT THE COURSE

Three mandatory disclosure regimes came into force on June 21, 2023, and the CPA who was not paying attention may have clients who are already offside. The most dangerous aspect of these rules is not their complexity — it is that common, well-established planning structures can trigger reporting obligations that practitioners would never have associated with an aggressive tax position. A trust sandwich structure where the corporate beneficiary is owned even partly by another trust is now a notifiable transaction. A success fee on a tax plan that saves a client money may now require disclosure on Form RC312. A large corporation whose tax provision is more conservative than its tax return may owe $2,000 per week per unreported position. These are real risks for real clients, and the penalties are not proportionate.

Notifiable Transactions (s.237.4) are the starting point. The government designates specific transactions as abusive, and any transaction that is the same as or substantially similar must be disclosed within 90 days. The persons required to report are the advisor who gave the advice, the promoter who received the fee, the client who received the tax benefit, and any person who entered into the transaction for the client's benefit. The current five listed transactions are:

• Partnership commodity or hedge straddles
• Plans to avoid the 21‑year rule for trusts using corporations as beneficiaries where those corporations are owned by trusts or non‑residents — three structural versions are analyzed including the trust sandwich variant most likely to be triggered inadvertently by an existing structure that was never designed to avoid the 21‑year rule
• Debt forgiveness and bankruptcy arrangements
• Tax loss trading schemes that move losses or tax attributes to unrelated parties
• Back‑to‑back arrangements designed to avoid the thin capitalization rules or non‑resident withholding tax

The penalty for an advisor who fails to report a notifiable transaction is $10,000 plus the fee charged plus $1,000 per day to a maximum of 100 days — so $110,000 plus the fee. Disclosure is not an admission that anything is wrong. If in doubt, report. The course covers the Form RC312, CRA guidance, and the practical approach to identifying whether an existing arrangement requires review.

Reportable Transactions (s.237.3) apply when two conditions are both present: there is an avoidance transaction (one main purpose is a tax benefit), and any one of three hallmarks is met. Previously two hallmarks were required; the threshold has been reduced to one. The three hallmarks are: a contingent fee based on tax savings; a prohibition on disclosure built into the engagement terms; or a guarantee of the result or indemnity if it is not achieved. The most common trigger is the contingent fee. The course covers what is excluded per CRA guidance — value billing not tied to tax savings, R&D credit work, winning an audit or appeal — and what is not, including practical worked examples of fee structures that fall on each side of the line. Normal professional liability insurance, limitation of liability clauses, and standard M&A representations and warranties are excluded. The safe practical response is to review engagement letter terms and remove any language that could inadvertently constitute a confidentiality prohibition or performance guarantee.

The course also covers the expanded CRA audit powers confirmed by five recent Federal Court decisions, all of which went substantially in CRA's favour: Cameco (oral interviews cannot be compelled, but written answers can be required); Miller (documents are defined broadly beyond physical records; taxpayers must make reasonable efforts to obtain information held by third parties); Ghermezian (CRA can request information that does not exist as a document, such as a corporate chart the taxpayer has never prepared; CRA does not need to physically attend business premises; the taxpayer bears the burden on reasonableness); Zeifmans (a CPA firm holding client files can be compelled to produce them under a compliance order, even when the CPA firm itself is not under audit; records in the possession of a CPA are not privileged unless they are communications from legal counsel); and Schreiber (the compliance obligation extends to non‑residents with Canadian tax ties; CRA does not need to first prove residency in order to gather information to determine residency status). The practical implication for CPAs is clear: file notes, memos, working papers, and client correspondence are producible unless they are specifically communications from a lawyer exercising solicitor‑client privilege. Write accordingly.