CRA Payment Arrangement for HST or Corporate Tax You Owe

Can my business get a CRA payment arrangement for overdue HST or corporate tax?

A business can ask for a payment arrangement, the CRA's term for a payment plan. The CRA considers them for business debts and decides on the business's ability to pay under its collections policy, which gives way to the legislation where they differ (IC98-1). A business can schedule pre-authorized debit (automatic payments from its bank account) in its My Business Account for corporate income tax (T2), payroll deductions, GST/HST and partnerships; other business debts are arranged by phone (CRA: arrange to pay over time).

An arrangement spreads the payments. It does not reduce the tax, and interest and penalties stay on the balance. A case is not simple when:

• the balance sits on top of missed or wrong returns, or on an estimated assessment;
• a legal warning, garnishment or collections-officer letter has already arrived (call the number in that letter first, and see the legal warning section below);
• the debt includes GST/HST or payroll deductions, which can lead to a personal assessment of a director (or of a partner, for GST/HST);
• the business is in Quebec or Alberta: provincial corporation tax, and in Quebec generally GST/HST, is not with the CRA.

Gather before asking: every notice of assessment or reassessment and collections letter; the CRA's balance for each account (corporate tax, GST/HST, payroll); a list of returns filed and not filed; bank statements; an income and expense list; assets and debts; and a record of what the business tried to borrow.

If one of these applies, the filings and the real balance usually need a professional's review; the last section routes each case.

What does the CRA ask for before it agrees to terms?

The CRA asks for proof that the business cannot pay in full now. Its collections policy expects the business to have tried every reasonable way to raise the money, by borrowing or rearranging its affairs, and to supply documents showing income, expenses, assets and liabilities. A collections officer may check that information before accepting terms (IC98-1).

Once terms are agreed, the CRA says the business must keep paying on the agreed dates, file all future returns on time and stay up to date with its other obligations. It may review the arrangement periodically (CRA). If the business needs to change the plan or cannot make a payment, the CRA says to call.

How do I ask: which CRA line or online service fits corporate tax, HST or payroll?

Use My Business Account for pre-authorized debit on corporate tax, GST/HST or payroll deductions; otherwise call the line for that debt. The lines open Monday to Friday, 8 am to 8 pm Eastern, and are closed on public holidays (CRA: call us if you can't pay).

These are the CRA's lines. A business located in Quebec generally deals with Revenu Québec for GST/HST and corporation tax (see the Quebec section below). From outside Canada and the US, all three debts use 1-613-221-3003.

When the wait is long, the CRA offers a callback for these three debts, within Canada and the US. Have ready the business number, business name, address, and the assessed return or notice, or sign in to My Business Account. If a collections officer is assigned, call the number in that officer's letter.

The CRA says a business's representative cannot schedule pre-authorized debits for the business, so the setup must come from the business's own account. A sole proprietor's personal income tax debt uses different tools: the CRA points to My Account or its automated line for that debt (CRA).

How much a month will the CRA accept, and how long can the plan run?

The CRA sets the amount and the length case by case, and its arrangement guidance sets no minimum payment or maximum term. The policy says an arrangement is one both sides can accept, based on ability to pay, so the figure comes from the business's income, expenses, assets and debts (IC98-1).

Propose a payment the business can make on every date. The CRA says that paying less than agreed, without changing the arrangement first, can lead to legal action (CRA). If the inability to pay comes from circumstances beyond the business's control, the CRA may allow payment to be postponed until finances improve; interest and penalties still apply meanwhile.

Can the CRA ask for security, such as a letter of credit or a mortgage?

It can. The CRA may accept security in addition to a payment arrangement, or instead of payment, until the debt is paid. Its examples are bank letters of guarantee, standby letters of credit and mortgages. It says acceptable security must be easy to turn into cash and collectable on demand, and that other forms are judged case by case (IC98-1).

Whether security is asked for or accepted on a given file is for the CRA to decide, case by case. An offer of security also restarts the period the CRA has to collect, covered below.

Do CRA penalties and interest keep running during a payment plan?

Yes. While the CRA postpones or spreads payment, interest and penalties that apply continue to be added to the debt (IC98-1). Interest runs from the payment due date, and a late GST/HST payment draws it even when the return was filed on time (CRA: interest and penalties; Excise Tax Act, s. 280). The GST/HST late penalty is for a late return, not a late payment (s. 280.1); a late payroll remittance carries its own penalty. On corporate tax it is compounded daily on the unpaid balance until payment, at a rate set every three months (CRA: understanding interest; prescribed rates). A longer plan therefore costs more interest. How interest and penalties are worked out for each debt is in CRA penalties, interest and relief and late payroll remittance.

The CRA's relief policy lets it consider cancelling all or part of the interest from when payments start where the business's demonstrated ability to pay requires an extended arrangement, the agreed payments are made on time and it stays compliant. Relief is discretionary, and a business asking on grounds of inability to pay must state all its income, expenses, assets and liabilities in writing (IC07-1R1). How to ask is in CRA penalties, interest and relief.

What if I miss a payment or can no longer keep up?

Call before the payment date. The CRA says to call if you need to change the arrangement or cannot make a payment (CRA). It may begin legal actions if scheduled payments are not made on time (CRA: if you don't pay your debt).

The CRA does not say a missed date is excused or that it cancels the plan, so treat any missed date as a reason to call first. New returns and new GST/HST or payroll amounts also have to be filed and paid on time while the plan runs.

If the business cannot afford any plan it could keep, that is the point to get advice before a legal step starts; see corporate tax help.

What is a legal warning, and what can the CRA do next on a business debt?

A legal warning tells the business the CRA can start legal collection. It is valid for 180 days, and the CRA can act at any point in that window even if the balance changes. For GST/HST and payroll deduction debts, the notice of assessment or reassessment counts as the written warning, so the CRA can begin legal action once it has attempted a verbal warning. Legal action may also begin if the business has not confirmed an arrangement to pay (CRA).

Once a garnishment or other legal step has started, the CRA says it usually keeps it until the account is paid in full, unless the action is shown to cause financial hardship (IC98-1). The policy does not say a later arrangement releases it, so ask the collections officer.

If the corporation does not remit GST/HST or payroll deductions, the CRA can also assess a director personally (Income Tax Act s. 227.1, Canada Pension Plan s. 21.1 and Employment Insurance Act s. 83 for payroll; Excise Tax Act s. 323 for GST/HST), but no action or assessment can come more than two years after the person last ceased to be a director. IC89-2R3 does not list corporate income tax. Whether a director is liable depends on the facts; see catching up on unfiled corporate returns, which also covers a frozen bank account, and payroll audits and worker status rulings.

Owners and partners can owe personally too. A sole proprietor has no separate company: the individual is the person who must remit the GST/HST (Excise Tax Act, ss. 123(1) and 228(2)), so the debt is the owner's own. Each partner other than a limited partner is jointly and severally liable for the partnership's GST/HST that became payable while they were a member (s. 272.1(5)). Moving money or property out of a business that owes tax, for less than its value, to a spouse, a person under 18 or someone not at arm's length (an owner or a related company) can make the recipient liable up to the value they received without paying for it (Income Tax Act, s. 160; Excise Tax Act, s. 325).

Does filing an objection or appeal stop the CRA from collecting from a corporation?

For corporate income tax, mostly yes, unless the corporation is a large corporation: the Income Tax Act holds back most legal collection steps on the disputed amount while an objection or appeal is open. Set-off still applies, and GST/HST and payroll debts get no holdback. A corporation has 90 days from the notice date to object. The CRA's resolving-disputes page agrees that the disputed amount need not be paid while the review is under way, but interest still runs on any amount left unpaid and, if the objection fails, is charged from the balance-due day (CRA: resolving disputes). The CRA's legal-warning page, however, says it can keep collecting corporate assessments during an objection or appeal (CRA: legal warning), so confirm the account's status with the collections officer before relying on the holdback.

Disputing the assessment is covered in reviews, audits and voluntary disclosure.

How long can the CRA collect a business debt, and what restarts the clock?

The CRA can collect for a fixed period that starts after the notice of assessment, and some actions restart it (CRA: how long a debt can be collected).

The CRA's page gives one figure for payroll debt, but the Income Tax Act sets 10 years for any amount payable under it (section 222), which can include income tax withheld at source, and the same CRA page lists no limitation period at all for CPP. Ask the CRA which period applies to each part of a payroll balance.

The CRA gives these examples of business actions that restart the period: a voluntary payment, a letter proposing a payment arrangement, a written acknowledgment of the debt, an offer of security instead of payment, a written request for a reassessment, a notice of objection or appeal, and asking about pre-authorized debit. It also restarts when the CRA garnishes, sets off, applies a refund, certifies the debt in the Federal Court or starts a seizure and sale.

For income tax debts, the Act restarts the period only on a written promise or acknowledgment of the debt, a payment, or a CRA collection action or assessment of another person for the debt, and adds the days a collection restriction applies during an objection or appeal (section 222). For GST/HST, Excise Tax Act section 313 restarts it on the same kinds of events and adds the days the CRA has postponed collection. The CRA's page lists a notice of objection or appeal under both restart and pause, so ask the collections officer how the period is counted on your file. Events such as bankruptcy, an insolvency proposal, becoming a non-resident or the CRA holding security also extend it.

After the period ends, the CRA usually cannot take other collection action. Proposing terms in writing is among the actions the CRA says restart the period, so it is not a dependable end date for a business that is negotiating.

Quebec and Alberta: why might I need a second arrangement for provincial tax?

A CRA arrangement covers only what the CRA administers. The CRA administers provincial and territorial corporation tax everywhere except Quebec and Alberta (CRA), so it does not set terms for an amount owed to either province.

Alberta. Tax and Revenue Administration administers the Alberta Corporate Tax Act, and a corporation with a permanent establishment in Alberta files a separate Alberta return (Alberta: corporate income tax). For an Alberta balance it cannot pay, the corporation contacts Filing Compliance and Collections at 780-422-1782. A plan covers the whole debt including interest, in some corporate cases it can be entered online, and without payment or an arrangement Alberta may take legal action (Alberta: collections).

Quebec. Quebec corporation tax is not administered by the CRA, and Revenu Québec generally administers GST/HST for a business located in Quebec (CRA: RC4022). For employees working in Quebec, QPP, QPIP and Quebec income tax go to Revenu Québec, and EI and federal income tax to the CRA (CRA: T4001), so a Quebec payroll balance can involve both. A Quebec business should check with Revenu Québec for terms on its debts. That process is separate from the CRA's and is not covered here; late payroll remittance covers Quebec employers.

Example

Amounts are illustrative and in Canadian dollars.

An Ontario corporation owes corporate tax after a late T2

The corporation owes $40,000 of corporate tax and proposes to pay $2,000 a month. Twenty payments is the arithmetic only if interest and penalties are ignored; interest keeps running on the unpaid balance, so the plan runs longer. The CRA decides the amount and term after reviewing the corporation's income, expenses, assets and debts, and asks whether it tried to borrow. The corporation sets up pre-authorized debit in My Business Account or calls the corporate tax line, and keeps filing on time.

A British Columbia sole proprietor owes GST/HST

The proprietor owes $12,000 on the GST/HST account, already assessed, and pays $3,000 now. The proprietor asks to pay the remaining $9,000 by pre-authorized debit from the business's own account, if the CRA agrees. The debt is the proprietor's own, not a company's. Because the notice of assessment itself counts as the written legal warning on a GST/HST debt, no separate letter has to come first, so the proprietor asks early. Personal income tax owing is a separate debt with a separate route.

An Alberta corporation owes federal and Alberta tax

The corporation has a permanent establishment in Alberta and owes $25,000 of federal corporate tax and $8,000 of Alberta corporate tax. A plan with the CRA covers the federal $25,000 only. The corporation contacts Alberta's collections unit separately for the $8,000, so it may end up with two plans and two sets of payment dates.

Different for you?

• The balance sits on years of missed returns, estimated assessments or a legal warning: the real balance and the returns behind it are the questions to settle alongside any request for terms. See catching up on unfiled corporate returns and estimated GST/HST assessments, and get corporate tax help with the filings, the real balance and the proof of income, expenses and assets the CRA will ask for.
• You are a director, partner or sole proprietor and the debt could reach you personally: who owes what, and what was paid out of the business while the debt stood, are questions to settle alongside any request for terms. See corporate tax help.
• The books are missing or do not match the CRA's balance: proof of income and expenses starts with reconciled books. See bookkeeping help, and recording CRA reassessments and penalties for the entries.
• You want interest or penalties cancelled: see CRA penalties, interest and relief.
• Payroll remittances are behind, or the CRA is examining payroll: see late payroll remittance, including Quebec employers, and payroll audits and worker status rulings for director liability on source deductions.
• You are asking how far back the CRA can reassess: see how far back the CRA can reassess.