Financial Tech Company Misses Out on $200K in Tax Credits After CRA Loses Documents

The Canada Revenue Agency (CRA) headquarters Connaught Building in Ottawa on Aug. 17, 2020. The Canadian Press/Sean Kilpatrick

A financial technology company based in Toronto has missed out on nearly $200,000 in tax credits after the Canadian Revenue Agency (CRA) lost its documents.

FOOi took the case to court after failing to appeal to the CRA and lost the case in late December 2023, as first reported by Blacklock’s Reporter.

“I have concluded that the CRA misplaced the Applicant’s original December 20, 2019 filing concerning the SR&ED claim for the 2018 taxation year,” Justice Ronald MacPhee wrote in the court decision.

“Unfortunately, even when an error has been committed by the CRA, the requirements of the [Income Tax] Act must be met in order to object to the Notice of Assessment.”

The issue started after FOOi applied for research and development tax credits for 2018, but did not hear back from the CRA.

The company was successful in getting the credits in 2017 and 2019.

The 2018 application was made in December 2019, but the court documents noted the company did not hear back for several months.

The company’s accountants attempted to reach officials to find out about the tax credit application but “had great difficulty in reaching anyone at the CRA,” the court documents said.

The period was during the COVID-19 pandemic when, the court noted, many CRA employees had been sent home to work.

However, Justice MacPhee said the CRA was not at fault.

“When a taxpayer receives a Notice of Assessment under the Act, to object to it one must send a written Notice of Objection to the Chief of Appeals, setting out the reasons for the objection and all relevant facts.”

FOOi did not follow that process.

In December 2020, FOOi found out that “the CRA could not locate the Applicant’s 2018 SR&ED claim filings.”

In January 2021, the company’s accountants sent a letter to the CRA explaining that they had not received a response. The letter included a duplicate copy of the tax credit application.

The court document says that in March, the company was informed that the tax credit “claim was denied as the claim was filed more than 12 months after the return was due.”

FOOi submitted a formal notice of objection in April. However, in June, it was notified that the objection could not be accepted “as it was filed past the prescribed deadlines.”

Justice MacPhee said that “despite the very frustrating facts of this case,” the notice of objection was not sent “in a timely fashion.”

“Furthermore, after the expiration of 90 days from the date of the assessment, an application for an extension of time with the Minister was not filed.”

It’s not the first mistake by the CRA that left Canadians without tax credit.

In January 2023, a report said that the CRA had deregistered about eight charities after misplacing their annual documents. This prevented those charities from issuing charitable tax receipts to donors.