Over the past few years, CRA has taken a targeted approach in reviewing amounts claimed under specific GIFI codes or on specific lines in the corporate tax return. Various projects were conducted, such as reviews of the following:

  • professional fees;
  • class 10 additions; and
  • travel expenses.

We have recently seen a new focus on advertising and promotion expenses included in GIFI codes 8520, 8521 and 8524 on Schedule 125, Income Statement Information. CRA is asking for the following:

the extent to which this project will grow

  • a detailed list of the transactions (or the general ledger entries) related to the expenses; and
  • a copy of the invoices and receipts for the ten largest transactions included in the expenses.

As of publication, several letters have focused on 2019 year-ends.

While there are many possible reasons to obtain this type of information, CRA may be analyzing whether any amounts deducted were personal, not wholly or partially deductible, or should have been capitalized. For example, provided no exceptions are available, amounts paid for food, beverages or entertainment are only 50% deductible (Section 67.1). Also, green fees for golf and membership fees in a golf club are not deductible (Paragraph 18(1)(l)) regardless of whether they are incurred for business purposes.

CRA continuing to review travel expenses

In addition to reviews of advertising and promotion corporate claims, we are also seeing more post-assessing corporate reviews on travel expenses, consistent with these types of reviews from previous periods.

In 2016, CRA advised that this type of review would form an aspect of CRA’s verification program (see VTN 424(9)). They noted at the time that while professional fees were the first category of expenses they were reviewing, they would focus on travel and advertising and promotion in the future (both of which we have now seen take place).

Like this article? Click here to become a Monthly Tax Update Newsletter subscriber.