Mandatory disclosure rules (MDR) – CRA guidance

The authors provide notes on the CRA’s updated guidance on the MDR.

  • Taxpayers must report a series of transactions that includes a notifiable transaction if the series straddles the date the transaction is designated as such.
  • The CRA list of “activities” that are not reportable is qualified by the requirement that they “stand alone”. Query whether some (slight?) variation of a listed activity or its association with some other transaction will vitiate the protection of the list.
  • The authors question whether the guidance carve-out for liability limitation clauses is supported by the language in the Income Tax Act regarding professional indemnity insurance. The guidance language also only refers to limitation clauses for accountants.
  • The authors also question the guidance carve-out for tax return insurance—again, given the relevant statutory language—and they note the guidance’s fuzzy warnings about “aggressive tax planning”.

The authors note generally that

[t]he CRA is not setting out the rationale for many of its positions in the guidance. In our view, many of these positions are clearly administrative concessions not clearly tied to the actual wording in the legislation. This could present difficulties in the future. The most obvious source of difficulty in the future will occur when advisers rely on positions taken in the guidance that are subject to disputes regarding their scope.

Philip Friedland and Adam Friedland “The Mandatory Disclosure Rules: Selected Issues, Part 2” Tax for the Owner-Manager 24:1 (January 2024)

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