Case Overview – A Win Without a Court Hearing
After the Canada Revenue Agency (CRA) denied the Taxpayer’s Canada Recovery Benefit (CRB) eligibility twice, our client faced a substantial repayment demand. He wanted another opportunity to have his evidence considered fairly, without the additional legal expense of a Federal Court hearing.
TaxPage secured exactly that result: a 3rd CRA review by officers who had not previously been involved in his application. We achieved our client’s objective through settlement, avoiding the further legal fees of arguing the case at a hearing. The CRA charges no fee to conduct the review.
The Problem – 2 Denials, a Disputed Income Calculation and a Repayment Demand
Jack (name withheld due to solicitor-client confidentiality) was a self-employed professional whose business suffered during the COVID-19 pandemic. His clients faced serious financial difficulties, and his usual work and earnings declined. To preserve those relationships and keep his business going, he reduced his fees and sometimes continued providing services without payment.
Like many self-employed Canadians affected by the pandemic, Jack applied for CRB. The CRA subsequently reviewed his eligibility and concluded that he had not established the minimum qualifying income. CRA then demanded repayment of the benefits he had received.
Jack requested a 2nd review and explained why he believed the CRA’s conclusion was wrong. The CRA again denied eligibility. This time, it also relied on a concern about whether he met the COVID-19-related income reduction requirement.
Two adverse decisions had left Jack facing the same problem. TaxPage’s task was to secure a fresh assessment of his claim through a process that made financial sense for him.
Why Jack’s Canada Recovery Benefit Denial Deserved a Closer Look
A disputed expense classification affected the $5,000 income threshold
Jack’s originally reported net self-employment income fell just below the CRB’s $5,000 qualifying income threshold. When reviewing his records, Jack identified personal expenses that he said had mistakenly been deducted as business expenses. Correcting that classification, he maintained, would put his net income above the threshold.
For CRB purposes, the distinction between gross revenue and net self-employment income matters. The legislation defines self-employment income by deducting expenses incurred to earn the revenue. Whether a particular expense properly belongs in that calculation can therefore affect eligibility.
The CRA’s internal notes acknowledged Jack’s proposed correction but questioned whether the supporting documents established it. Canadian tax lawyers at TaxPage examined how the reviewing officer had dealt with his explanation and the evidence. We challenged whether the resulting decision was adequately justified.
The pandemic’s effect on his business needed proper consideration
Jack had reduced his fees because his clients were struggling during the pandemic. Our position was that those reductions had to be understood in their commercial context: preserving client relationships was part of trying to sustain his business through COVID-19 disruption.
We also challenged the fairness of the review process. Jack’s position was that the CRA had focused its requests on the minimum threshold without giving him a meaningful opportunity to answer the separate concern about his income reduction.
These issues gave our lawyers at TaxPage specific grounds on which to challenge the 2nd review decision and pursue a fresh review.
Our Approach – Use Judicial Review to Secure a Practical Result
Set the objective before choosing the strategy
Our objective was clear from the outset: obtain a 3rd review. We wanted Jack’s claim reconsidered by officers who had not previously handled it, without incurring the additional legal fees of taking the application through a court hearing.
An application for judicial review can provide a route to challenge an adverse CRA 2nd review decision. The Federal Court can examine the lawfulness of the decision and the fairness of the process and can set a decision aside and return the matter for reconsideration.
For Jack, that made judicial review a means of pursuing the 3rd review he needed. Settlement could achieve that objective before a hearing became necessary.
Built the case for reconsideration
Our Canadian tax litigation lawyers filed the judicial review application, obtained the CRA’s decision making record, and examined the reasons behind the denial. We prepared Jack’s affidavit and supporting materials and served written cross examination questions concerning the reviewing officer’s evidence.
This work allowed us to access the decision against the actual record. We could identify the disputed evidence, explain our concerns about the reviewing process, and present a concrete basis for asking that the matter be reconsidered.
Maintain pressure while pursuing settlement
The proceeding encountered delays. Our lawyers continued advancing the file, preparing the required court materials and pursuing hearing arrangements while maintaining settlement discussions with Department of Justice lawyer acting for the CRA.
Taking those procedural steps supported our effort to resolve the matter. Though, the desired outcome remained the same: a 3rd review without the additional expense of a hearing.
The Result – TaxPage Secured the 3rd CRA Review
We achieved our objective. The settlement provided for the challenged 2nd review decision to be set aside and Jack’s CRB application to be reconsidered by CRA officers who had not previously been involved. The Federal Court application was then discontinued in accordance with the settlement.
For Jack, the benefits were concrete:
- A 3rd CRA Review: another opportunity to have his eligibility assessed after 2 denials;
- Different reviewing officers: reconsideration by officers who had not previously handled his CRB application;
- No court hearing: avoiding the additional legal fees required to argue the judicial review application at a hearing.
Why a cost-conscious litigation strategy matters
A benefits dispute can put a taxpayer under financial pressure before legal proceedings even begin. The cost of the next step matters alongside the strength of the legal argument.
In Jack’s case, our strategy connected the work we undertook to the outcome he wanted. We used the judicial review process to challenge the denial, developed the record, and persisted with settlement discussions until we secured an agreement for a 3rd review.
The distinction between the costs is straightforward. Jack incurred legal fees for our work in obtaining the settlement. The CRA’s 3rd review carried no review fee, and the settlement avoided further legal expense of a Federal Court hearing.
For taxpayers considering whether to challenge a CRB denial, this is a useful question to ask a lawyer: what result would solve the immediate problem, and what is the most effective way to pursue it?
Pro Tax Tips – What to do after a CRB 2nd Review Denial
Have the decision reviewed promptly. The usual deadline for judicial review is 30 days after the decision is first communicated. A Federal Court of Canada Judge may allow additional time, but taxpayers should not assume that an extension will be granted.
Preserve the evidence behind your explanations. Keep invoices, expense receipts, bank records, correspondence and copies of your submissions to the CRA. If an expense was misclassified, explain the correction and provide the documents to support it.
Show how COVID-19 affected the relevant benefit periods. Explain the relationship between the pandemic, your work and your earnings. A decline in annual income alone may not answer the CRA’s questions about particular CRB periods.
Discuss the desired result and its cost with your lawyer. A settlement for reconsideration may achieve your objective without a hearing. Jack’s case illustrates why that possibility should be considered as part of a focused litigation strategy.
Frequently Asked Questions (FAQs)
Can I obtain a 3rd CRA review after my CRB claim has been denied twice?
It may be possible. In Jack’s case, TaxPage challenged the 2nd review decision through applying for judicial review at Federal Court of Canada and secured a 3rd review through settlement. A 3rd review is not automatic; the decision, the record and the available grounds for challenge need to be assessed.
Does obtaining a 3rd review require a court hearing?
Not necessarily. Jack’s case settled before a hearing. TaxPage obtained the reconsideration we had sought through negotiations supported by the judicial review proceeding.
Does the CRA charge for a 3rd review?
The CRA does not charge a fee to conduct the reconsideration. Legal fees for obtaining that review or retaining a lawyer to assist with it are separate. In Jack’s case, settlement avoided the additional legal fees of proceeding to a Federal Court hearing.
What is judicial review?
Judicial review is the process where the Federal Court examines whether a CRA decision was reasonable and fair. It is not an appeal, and the Court does not re-decide the underlying eligibility question.
What is the deadline to file a judicial review application?
An application for judicial review must generally be filed within 30 days of the CRA decision being communicated, though the Federal Court can grant an extension in appropriate circumstances.
What is the difference between the Tax Court of Canada and the Federal Court?
The Tax Court of Canada hears appeals of tax assessments and reassessments. The Federal Court reviews discretionary CRA decisions, such as CRB eligibility determinations, that fall outside the Tax Court’s jurisdiction.
Can I appeal a CRB denial to the Tax Court of Canada instead?
No. CRB eligibility decisions are discretionary decisions of the CRA, so they are reviewed by the Federal Court through a judicial review application, not appealed to the Tax Court.
What evidence should I gather if I plan to challenge a CRB denial?
Keep records that support your reported income and any expense classifications, such as invoices, receipts, bank records, and correspondence with the CRA. These form the record that a reviewing officer or the Federal Court will consider.
Is it possible to settle a judicial review application before a hearing?
Yes. As in Jack’s case, a judicial review application can be resolved through settlement discussions with the CRA before a hearing is required, which can reduce both the cost and the time involved.
Does filing a judicial review application guarantee a different result?
No. A judicial review only requires the CRA to reconsider the decision. It does not guarantee that a new review will result in a different outcome.
Are settlement discussions with the CRA confidential?
Settlement discussions are generally conducted on a without-prejudice basis, meaning the substance of the discussions generally cannot be used against either party if the matter proceeds to a hearing.
How long does the judicial review and reconsideration process typically take?
Timelines vary by case complexity and CRA workload, but the process generally involves several months from filing the application to a reconsideration decision being issued.
CRB Denied? Contact TaxPage
If the CRA has rejected your CRB claim on 2nd review, have TaxPage assess the decision before the judicial review deadline passes. Our expert Canadian tax lawyers at TaxPage can examine your evidence, identifying potential grounds for challenge, and discuss a strategy that considers both your objective and the costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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