For the purposes of GST gross negligence penalties, a taxpayer will be treated as having made a misrepresentation ‘knowingly’ if the taxpayer was wilfully blind: if the taxpayer had reason to know that he or she should be making inquiries but did not, then the taxpayer will be treated as having been wilfully blind.
In Frank-Fort Construction Inc. v R, 2020 TCC 6, the taxpayer turned over its invoicing, bookkeeping, accounting and tax return preparation functions to third parties, including an accounting firm. The accountants failed to report certain sales although it had been given all of the necessary information. The Court found that, while reliance on a professional did not necessarily exonerate a taxpayer from gross negligence penalties, the taxpayer had not been wilfully blind or grossly negligent in this case.
Stuart Clark and Robert G. Kreklewetz “Eyes Half Open: Wilful Blindness Under ETA Section 285” /Tax for the Owner-Manager/ 21:2 (April 2021)
