Court allows admission of accountants’ statements

A court case from Nova Scotia reinforces the need for tax advisors to tread carefully when communicating with the Canada Revenue Agency (CRA) on their clients’ behalf. An article from the Canadian Tax Foundation explains.

In R. v. Spears (2016 NSPC 20), a Nova Scotia court held that a taxpayer’s accountant’s statement to the CRA can be admitted as evidence of the truth of its contents.

As Bryan Horrigan and Rob Kreklewetz point out in their analysis, the case is important for both tax advisors and the business owners who rely on them to deal with the tax authorities on behalf of their businesses.

“An out-of-court statement is generally inadmissible as evidence in court to prove the truth of the statement’s contents: this is the general rule against hearsay,” they note. “There are a number of exceptions to this rule, including an admission made by the opposing party. An admission is admissible as evidence of its contents. When the opposing party’s agent makes such a statement, it is also admissible as evidence of the truth of its contents.”

The decision suggests that when an accountant or other professional adviser is dealing with tax authorities regarding a taxpayer’s affairs, a statement made by the professional may bind the taxpayer and may be used against that taxpayer as evidence of the statement’s contents.

The article ”Admissibility of an Accountant’s Statements in Court” by Bryan Horrigan and Rob Kreklewetz was featured in the July 2016 issue of the Canadian Tax Foundation (CTF)’s Tax for the Owner-Manager.

CPA Canada gratefully acknowledges the CTF for providing access to the article on this important topic.

About the Author

Gabe Hayos, FCPA, FCA, ICD.D

Vice-president, Taxation, CPA Canada

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