The Canada Revenue Agency: protecting Canadians from gifting tax shelter schemes

Ottawa ON, October 30, 2012 - The Canada Revenue Agency (CRA) is taking steps to better inform and protect taxpayers from gifting tax shelter schemes.

This is the time of year when promoters are heavily marketing their tax schemes to Canadians. For this reason, the CRA is reminding Canadians that if it seems too good to be true, it probably is. 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.

Starting with the 2012 tax year, the CRA will put on hold the assessment of returns for individuals where a taxpayer is claiming a credit by participating in a gifting tax shelter scheme. This will avoid the issuance of invalid refunds and 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. All gifting tax shelter schemes are audited and the CRA has not found any that comply with Canadian tax laws. 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 in question.

The CRA has to date denied more than $5.5 billion in donation claims and reassessed over 167,000 taxpayers who participated in gifting tax shelter schemes. In addition, the CRA has revoked the charitable status of 44 charitable 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.

The CRA urges Canadians who are considering entering into a tax shelter arrangement to obtain independent, professional advice before signing any documents. Independent advice means advice from a tax professional who is not connected to the tax shelter or to the promoter.