In discussing the role of the GAAR Committee, CRA indicated that where the transactions under audit by the Tax Services Office are similar to situations which already have resulted in a recommendation to apply GAAR, generally the TSO will issue a proposal letter and obtain the taxpayer’s representations. The TSO will subsequently refer the matter to Headquarters, with the taxpayer’s representations, to obtain the GAAR recommendation.
Where the matter instead has not been previously considered by the GAAR Committee, and the GAAR is likely going to be an assessment position, the TSO will refer the matter to Headquarters prior to issuing the proposal letter – so that it would generally only issue a proposal letter if Headquarters recommends GAAR’s application. Headquarters will generally, in turn, refer the matter to the GAAR Committee for consideration. Headquarters might sometimes recommend not to proceed with the GAAR reassessment, without consulting with the GAAR Committee, in circumstances where they believe that there are no grounds to consider the application of the GAAR.