On behalf of Neuberger & Partners LLP posted in Uncategorized on Wednesday January 30, 2013.

Auditors meet Investigators at the Point of Predominant Purpose

For the last several years, tax professionals have been in a state of confusion about the implications of when a tax audit has been used by the CCRA for purposes of investigating tax evasion. Recently, the Supreme Court of Canada has provided guidance on this issue, but has also left the tax professional and the taxpayer with lingering questions.

In Regina v. Jarvis, CCRA had commenced an audit into sales by the taxpayer of his art collection. Audit branch conducted an independent investigation and determined that the taxpayer had significantly underreported some $700,000.00 in revenue for two tax years. The auditor subsequently referred the file to Special Investigations. Although the auditor had reviewed a vast amount of information and documents evidencing tax evasion, the taxpayer and his accountant were not informed about the non-audit purpose until well after S.I. had been engaged.

At trial the taxpayer was acquitted of all counts based upon violations of the taxpayer’s constitutional rights. On appeal, the acquittals were overturned and a new trial was ordered. The Supreme Court of Canada agreed that the acquittals ought to have been overturned, and set out some guiding principles for the taxpayers and tax advisors.

What the S.C.C. Does Say?
The S.C.C. has confirmed that under section 231.1(1) and 231.2(1), sources of information pertaining to the taxpayer’s affairs are compellable and the taxpayer must cooperate during an audit. The resulting audit can render decisions imposing regulatory penalties. At this stage of inquiry the taxpayer does not enjoy the protections afforded under the Charter of Rights and Freedoms. However, once an adversarial relationship crystallizes between the taxpayer and the tax officials, constitutional protections are afforded the taxpayer, such as the right to silence and counsel. The S.C.C. established that the relationship crystallizes only where the predominant purpose of the inquiry of the tax official is an investigation into penal liability. In order to assess this, the S.C.C. set out several factors to be considered in determining what the predominant purpose, some of which are:

Did the authorities have reasonable grounds to lay charges? 
Was the general conduct of the authorities such that it was consistent with the pursuit of a criminal investigation?

Had the auditor transferred his or her files and materials to the investigators? 
Is the evidence sought relevant to taxpayer liability generally?

Or, as is the case with evidence as to the taxpayer’s intent, is the evidence relevant only to the taxpayer’s penal liability?

The above examples are not exclusive and the presence or absence of any given factor does not conclude the issue. Also, other Provincial or Federal departments engaged in tax collection may have other protocols or guidelines that may also need to be considered in the analysis.

Audits and Investigations Are Not Mutually Exclusive! 
The audit phase of the inquiry may be used to support a subsequent investigation into penal liability under s. 239, and may also continue simultaneously with an investigation.

What the S.C.C. Does Not Say?
The S.C.C. does not define with precision when the adversarial relationship begins in the context of an audit nor does it delineate all of the actual protections that come into play when the relationship crystallizes. This is of concern for tax professionals, some of which see the audit, as just such a form of adversarial relations between the taxpayer and CCRA. The S.C.C. also stated that there is a low expectation of privacy in many of the documents typically obtained in the audit process. We therefore do not know from the decision how this level of privacy factors into the Constitutional rights afforded to a taxpayer.

What this Means?
Although the S.C.C. has confirmed the legitimacy of the vast audit powers and afforded little shielding to the taxpayer, the tax professional should always be on the look out for the presence of the various factors outlined in Jarvis that may assist in determining the predominant purpose of an audit is something far more serious.

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On behalf of Neuberger & Partners LLP posted in COVID-19 on Tuesday March 17, 2020.

At Neuberger and Partners, we are monitoring the COVID-19 situation and have implemented safety measures to ensure the safety of our clients and staff. Our priority is and always will be the health, well-being and safety of our staff, clients and colleagues.

We have put in place various measures to prevent and minimize the impact of COVID-19:

  • In addition to standard hand-washing habits, our staff are washing hands before and after every client interaction;
  • All individuals entering our office will be required to use our hand sanitizer to ensure the safety of our other clients and staff;
  • Regular disinfecting of our offices, public areas, meeting rooms and board rooms as well as increasing the frequency of disinfection of higher-traffic surface areas;
  • If a lawyer or client who has a scheduled meeting is feeling unwell, they will be strongly encouraged to stay home;
  • For the time being, we will avoid greeting clients and colleagues with our usual handshakes;
  • We will make every effort to ensure our firm will be stocked up with extra tissue and alcohol-based hand sanitizer; and
  • We will monitor and stay informed from the Government of Canada and World Health Organization for facts as they become available. We will ensure all staff and team members are educated on symptoms and are well informed on prevention and best practices.

Frequently Asked Questions:

Will the firm still run if there are closures?

  • We are committed to assisting our clients. We remain open to assist our clients at this time (following aforementioned standards for health and safety). For clients who wish to communicate with our firm virtually, we have the technology for virtual meetings and are able to respond to the needs of our clients in a manner best to protect our staff and clients’ health.

Are staff and lawyers set up to work virtually?

  • All lawyers and staff are set up to work virtually and continue to assist clients and one another remotely. All lawyers are available via telephone, email and virtual video conferencing.

What is the court situation? How will we deal with court closures?

  • At this time, the Superior Court of Justice is closed from March 17, 2020 to June 1, 2020 – unless a judge orders otherwise.
    If you have a March matter, your matter will be postponed to June 2, 2020.
    April matters will be postponed to June 3, 2020 and May matters will be pushed to June 4, 2020.
  • Similarly, the Ontario Court of Justice will be closed for 10 weeks for all out of custody matters in criminal practice court. In custody matters will still be addressed. It is unclear if out of custody matters such as trials or preliminary hearings will continue since the courts have left this decision to the discretion of the judges. However, Bail courts will remain open for the time being.
  • The Court of Appeal for Ontario has suspended all scheduled appeals until April 3, 2020. But we are still able to file materials and apply for urgent appeals to be heard.
  • We will advise clients by email of their next Court date.

How can payments be made?

  • Payments can be made via e-transfer and visa payments can be made over the phone.

If I have to deliver something to my lawyer, how shall I go about it?

  • For clients who wish to drop off documents but do not wish to come in contact with any one at the firm, you are encouraged to drop them off in our mail slot in front of our office.

We will be open and available for any questions, comments or concerns. Please call (416) 364-3111 for any further information.

Stay safe and healthy,

Joseph Neuberger