Tax & Trade Blog

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WILFUL BLINDNESS: SAME AS ACTUAL KNOWLEDGE

TO TAXPAYER'S CHAGRIN, "SHOULD HAVE KNOWN" SAME AS KNOWLEDGE

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In over 35 years of tax practice, we have had more than a few inquiries from taxpayers facing CRA Audits and Assessments maintaining that they did not actually know they were non-compliant with their tax obligations. The doctrine of “wilful blindness” is something that these taxpayers would have benefitted from understanding: that is the ability that Canada Revenue Agency (“CRA”) and the Tax Court of Canada (“TCC”) have to equate “knowledge” with “information that the taxpayer should have known but was perhaps ‘wilfully blind’ to”.

In this Tax Audit Series Report, we discuss the doctrine of “wilful blindness” and a recent TCC decision that upheld some $1.3 million in penalties and interest, on the basis that the taxpayer was wilfully blind to his tax non-compliance.

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NEW HOUSING REBATE FOR BUILDERS

TCC LOWERS THE BAR FOR "OCCUPATION AS A PLACE OF RESIDENCE"

As we have blogged here and here, homeowners who sell their newly built homes shortly after taking possession have long been a target of CRA audits.  When these homeowners also claim the GST/HST New Housing Rebate, the CRA reviews their claims closely.

A key issue in these New Housing Rebate claims is whether the homebuyers occupied the property as a place of residence after completion of construction.  In the past, courts have applied a stringent standard in interpreting what constitutes “occupation as a place of residence”.

In a recent decision, Sharma v. The King (2025 TCC 145), the Tax Court of Canada (“TCC”) lowered the bar for establishing “occupation as a place of residence”, signalling an attenuated interpretation that favours taxpayers.