A corporation was assessed in its 2007, 2008 and 2010 taxation years regarding unremitted source deductions for its 2006 to 2009 taxation years together with interest and penalties. In January 2014, it applied for penalty and interest relief under subsection 220(3.1) for its 2006 to 2009 taxation years, and was granted partial interest relief. The application was denied for the penalties but partially granted for the interest that accrued
CRA assessed the director pursuant to s. 227.1 in September 2018, and the director applied for relief under s. 220(3.1) in 2019.
After indicating that “the director’s liability under subsection 227.1(1) arises from his joint and several liability with the corporation and does not create a second tax debt,” the Directorate stated:
[T]he phrase “in respect of that taxation year”, as used in subsection 220(3.1), should not be viewed as a reference to the taxation year in which the director was assessed. Instead, the director’s joint and several liability, together with the fact that this liability arises from the Act rather than the assessment, support the conclusion that the phrase “in respect of that taxation year” should be read as a reference to the underlying liability (i.e. that of the corporation).
Accordingly, as the taxpayer’s application for interest and penalty relief was in respect of the 2006 to 2009 taxation years, the 10-year limitation in s. 220(3.1) applied.