In an effort to combat gifting tax shelter schemes, the Canada Revenue Agency (CRA) says that it won’t assess the returns of taxpayers claiming a credit from these sorts of schemes until it has audited the arrangement itself.
The CRA said Tuesday that, starting with the 2012 tax year, it will put the returns of taxpayers claiming a credit from a gifting tax shelter scheme on hold to avoid the issuance of invalid refunds, and to discourage participation in these abusive schemes. Assessments and refunds will not proceed until the completion of the audit of the tax shelter, which may take up to two years, it says.
All gifting tax shelter schemes are audited, the CRA notes, and it says that it has not found any that comply with Canadian tax laws. To date, it has denied more than $5.5 billion in donation claims and reassessed over 167,000 taxpayers who participated in gifting tax shelter schemes, it reports.
Additionally, the CRA has revoked the charitable status of 44 organizations that participated in these gifting tax shelter schemes. Since June 2000, the CRA has also assessed $63.5 million in third-party penalties against promoters and tax preparers, it says.
A taxpayer whose return is on hold will be able to have their return assessed if they remove the claim for the gifting tax shelter receipt, the CRA adds.
It also urges taxpayers considering a tax shelter arrangement to obtain independent, professional advice before signing any documents. The CRA stresses that if it seems too good to be true, it probably is. And, if a tax shelter promoter offers a tax receipt for a larger amount than the donation or payment, it is very likely not a valid donation, it notes.