Despite numerous warnings and audit actions, some taxpayers are still participating in tax shelter gifting schemes, the Canada Revenue Agency (CRA) says.

The CRA issued a warning on Friday that it plans to audit all tax shelter gifting arrangements.

For audits completed to date, over 65,000 taxpayers who participated in these schemes have been reassessed, or are in the process of being reassessed, the CRA says.

In most cases the CRA has denied the “gift” completely, with well over $2.5 billion in claimed donations being denied.

The CRA reminds taxpayers that tax shelter numbers are used for identification purposes only. A tax shelter with an identification number does not guarantee that taxpayers are entitled to receive the proposed tax benefits.

Taxpayers who participated in a tax shelter gifting arrangement in 2007 and claimed a donation on their tax return are not in clear. Although the claim may have been accepted as filed, “this does not mean that the CRA agrees with your donation claim,” the agency says. It reminds taxpayers to keep records in case the CRA reviews the return.

The CRA generally has three years from the date of assessment to audit and reassess taxpayers. These audits can take over a year to complete. “The fact that investors in these tax shelters have not been contacted and/or reassessed should not be interpreted as the CRA’s acceptance of their claim,” the agency says.

Penalties will be considered, especially where an investor was audited and reassessed for previously participating in a gifting scheme, the CRA warns.

Tax shelter gifting schemes continue to be marketed and claim to be different from those for which the CRA has previously issued warnings. However, completed audits have shown that, in many cases, there was effectively no gift being made and, as a result, the donation was reduced to zero. Taxpayers should avoid all schemes that promise donation receipts for three to four times the cash payment, the CRA says.

Packages promoting these schemes sometimes include letters of commendation about the particular charity, which can give the impression of endorsing the scheme itself. “These letters should not be interpreted as providing any assurance that these schemes do what they claim to be doing, or that the promised tax benefits are in accordance with the Income Tax Act,” the CRA says.

Canadians thinking about participating in a tax shelter gifting arrangement are urged to get independent legal and tax advice from a tax professional that is not connected to the arrangement or the promoter.

IE