Principal Issues: Whether ease of financial reporting constitutes a sound business reason for changing the fiscal period end.
Position: Yes.
Reasons: Ease of financial reporting is in line with the reasons that have been accepted over the years.
March 12, 2010
East Central Ontario Tax Services HEADQUARTERS Office/Peterborough Income Tax Rulings Directorate Attention: Stan Wadlow, Manager Lindsay Frank Taxpayer Services and Debt Management (613) 948-2227
2009-031106
Change in Fiscal Period End
This is in reply to an email from Jean-Marie Hochu. At issue is whether ease of financial reporting could constitute a sound business reason to allow a change to a corporation's fiscal period end.
Subsection 249.1(1) of the Income Tax Act (the "Act") defines a fiscal period of a business or property of a person or partnership. It is the period for which the accounts of a person or partnership, in respect of the business, are made up for purposes of assessment under the Act. Subsection 249.1(1) also sets limits when a fiscal period may end. In the case of a corporation other than a professional corporation, paragraph 249.1(1)(a) states that a fiscal period may not end more than 53 weeks after the period began.
Subsection 249.1(7) provides that a corporation may not change its fiscal period end without the Minister's concurrence. In order for the Minister to concur with such a change, the corporation must provide sound business reasons, as indicated by Ms Hochu's reference to IT-179R (archived), paragraph 2. "Sound business reasons" for changing the fiscal period end could, for example, include ease of financial reporting.
In closing, please note, however, that where difficulty exists in deciding whether to grant a change to a fiscal period end, the Audit Division should be consulted. Meanwhile, should you need clarification or further information, please do not hesitate to contact Lindsay Frank at the number provided above.
B.J. Skulski
Manager
Insolvency and Administrative Law Section
Ontario Corporate Tax Division
c.c. Jean-Marie Hochu
Client Services Section
East Central Ontario Tax Services Office/Peterborough