Last year, the Department of Finance proposed amendments to section 237.3 of the Income Tax Act (Canada) (the “Act”) that reduced to one the number of “hallmarks” that would trigger reporting on an avoidance transaction. In response, the Joint Committee on Taxation of the CBA and CPAC expressed concern that ordinary professional fees could constitute a hallmark.
The broad areas of concern highlighted by the submission were “value billing,” contingency work, and fees based on
the number of taxpayers participating (an example of which, according to the joint committee, would be a rate given for the bulk preparation of T2057 forms).
Finance responded but only by amending the legislation to exclude fees related to SR&ED form filing. Finance also inserted comments in the technical notes for the legislation that purport to provide comfort. The authors question the value of the comments, however, which are not law and which come with caveats that will likely undermine their value for litigation purposes.
Philip Friedlan and Adam Friedlan “Bill C-47 and the Interaction Between Adviser Fees and Reportable Transactions” Tax for the Owner-Manager 23:3 (July 2023)
