November 4, 2024

The Strategic Choice After Reassessment

Comparing the CRA’s self-adjudication stage with independent oversight in appeal

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When CRA issues a Notice of Reassessment (NoR), taxpayers who contest it face a structural choice: remain in CRA’s self-adjudication stage at objection, or transition to the Tax Court’s independent oversight. The law allows either path. The decision shapes both the resources executives commit and the probabilities of a favourable outcome.

The law does not require taxpayers to complete CRA’s self-adjudication stage step by step. Taxpayers may transition to the Tax Court 91 days after filing a notice of objection. In complex or high-stakes cases, remaining in CRA’s objection stage rarely changes outcomes and can add time and cost without materially improving results.

This decision is one of the three critical inflection points in CRA challenges. For context on all three, see The Three Critical Inflection Points in CRA Challenges.

Two Pathways After Reassessment: Continue Self-Adjudication or Transition to Independent Oversight

After filing a notice of objection, executives face two options:

Fully engage CRA’s self-adjudication process at the objection stage
Disengage after 91 days and leverage the Tax Court’s independent oversight

The table below compares these pathways in terms of objectives, costs, time, complexity, and control.

Category	CRA Self-Adjudication (Objection Stage)	Independent Oversight (Tax Court Appeal)
Objective	Reverse the NoR through CRA’s self-adjudication process.	Reverse the NoR through negotiation under court oversight or, if necessary, a judicial ruling.
Professional Fees	Lower initial cost, but higher overall if the issue persists into appeal.	Higher initial cost, but lower overall in many cases due to earlier and more definitive resolution.
Time	Often lengthy due to assignment delays; usually exceeds appeal timelines if objection fails.	Comparable to objection, but often shorter overall when resolution occurs under court supervision.
Complexity	Less complex initially but lacks the procedural safeguards of a court. Submissions here can constrain options later.	More complex legally, but provides structured opportunities for resolution, including mediation and pre-trial negotiations.
Outcome Control	Limited rights; outcome determined within CRA’s self-adjudication. Submissions may limit arguments later.	Greater control through negotiation or judicial oversight, ensuring a more balanced process.
Public Record	Private process; no published record.	Pleadings published; settlements private; judgments published if a trial occurs.
Potential for Settlement	Settlement possible, but within CRA’s self-adjudication stage; repeated positions can reduce flexibility later.	High settlement potential in a more balanced environment, often before trial.

Analysis

Advisors often recommend the pathway with which they are most familiar. Compliance-focused professionals tend to emphasize CRA’s self-adjudication stage, while litigation specialists highlight the advantages of independent oversight.

The choice is ultimately strategic: it depends on weighing probabilities, costs, and the importance of external review.

Strategic Reflection

Questions for executives assessing whether to remain in CRA’s self-adjudication process or transition earlier to the Tax Court’s independent oversight:

What probability of success is realistic at CRA’s self-adjudication stage compared with appeal under independent oversight?
How important is independent oversight in creating balance when CRA has already formalized its position?
If objection fails, what additional time and cost will have been incurred that could have been avoided by moving to appeal earlier?
How might today’s submissions shape the record a judge will later review — or give CRA added leverage at appeal?

Closing Note

After reassessment, executives must decide whether to continue in CRA’s self-adjudication stage or to move to the Tax Court’s independent oversight. The right choice depends on balancing probabilities of success, cost, and long-term positioning.

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The Strategic Choice After Reassessment