2020-0874951I7 Change to FPE for CEBA

Principal Issues: 1. Does subsection 249.1(7) of the Income Tax Act (Act) allow the Minister to allow a taxpayer’s request to retroactively (for the year that has passed) change the taxpayer’s FIRST fiscal period end (FPE) where the taxpayer's return is already assessed? 2. If the answer is no, would it change where the return is filed but not assessed?

Position: 1. No 2. Yes

Reasons: 1. Where a taxation year has already been assessed on the basis of a fiscal period end, the Act does not have any provision that allows it to reassess to change the FPE. 2. Subsection 249.1(1) allows specific taxpayers to choose their fiscal period for filing their first tax return for the purpose of assessment. Accordingly, where a return has not been assessed, in our view, there is flexibility for the taxpayer to change the FPE.

Author: Agarwal, Lata
Section: 249, 249.1, 152

                                                                                                         December 24, 2020

Joanne Verkerk                                                                                HEADQUARTERS
Manager, Technical Applications                                                      Income Tax Rulings Directorate
320, Queen Street          
Ottawa, ON  K1A 0L5                                                                       Lata Agarwal

 Attn: Joanne Verkerk
                                                                                                         2020-087495

Change to fiscal period end

To my understanding, you have sought our comments on the following questions:

1.    Does subsection 249.1(7) of the Income Tax Act (the “Act”) provide the Minister with the discretion to allow a taxpayer’s request to change the taxpayer’s fiscal period end (“FPE”) where the taxpayer’s return has been assessed?

2.    If the answer to the above question is no, in view of the objective of CEBA program, would the answer change if the taxpayer has filed the return but it is still not assessed?

OUR COMMENTS

1.    Where the tax return for a particular FPE has already been assessed, our position as described in TI E2014-053940 below is that subsection 249.1(7) does not provide discretion for a FPE change:

….. if a period of time has already been assessed as part of a taxation year, it is our view that the scheme of the assessing provisions in section 152 of the Act does not make it possible to assess the same period of time as part of the new taxation year. Therefore, in this situation, it is not possible for the Minister to treat the taxation years in question as not having been assessed in order to allow the change in the fiscal period…

In our view, that position is supported by the context and purpose of subsection 249.1(7) and the reference to “a fiscal period” is a reference to the period in which the request is made as follows, that does not apply under the current situation:

No change in the time when a fiscal period ends may be made for the purposes of this Act without the concurrence of the Minister.

In our view, the above wording indicates that it would only apply to a taxpayer’s request for change to FPE when the fiscal period has still not ended.

2.    The preamble in subsection 249.1(1) of the Act states as follows:

For the purposes of this Act, a "fiscal period" of a business or a property of a person or partnership means the period for which the person's or partnership's accounts in respect of the business or property are made up for purposes of assessment under this Act, but no fiscal period may end…
In our view, the above wording of subsection 249.1(1) indicates that the purpose of specifying a particular period of time as a fiscal period is that a corporation can choose, within the parameters specified under the subsection, a FPE for preparing its accounts for the purposes of assessment. In general, where a corporation has filed its first income tax return, but an assessment is still to be made, the provisions of the Act do not appear to prevent the corporation from sending an amended tax return with a new FPE. 

We trust these comments will be of assistance.

Lata Agarwal
A/Manager
Administrative Law Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.

© Her Majesty the Queen in Right of Canada, 2021

Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistribuer de l'information, sous quelque forme ou par quelque moyen que ce soit, de façon électronique, mécanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.

© Sa Majesté la Reine du Chef du Canada, 2021