Canada: Uncertain Tax Position Analysis not Safe from the CRA [2015 FC 714]

By Robert Robillard - 8 September 2015

This blogpost originally appeared on

Canada (National Revenue) v. BP Canada Energy Company 2015 FC 714 provides an interesting glimpse into the upcoming tax audit world.

Contrary to popular beliefs, this decision does not indicate that working papers should nowadays be protected through the lawyer-client privilege.

Instead, in an ever-increasing transparent audit world, this recent case law signals that proper tax planning should be substantiated by facts and the applicable law in order to increase its robustness during the scrutinity of the tax audit process.

In this decision, the Federal Court indicated, among other arguments:

“[18] BP Canada is a taxpayer under the Act. As any other taxpayer, BP has serious decisions to make in declaring its taxable income. As any other taxpayer, BP must decide what income is taxable. In instances of uncertainty, BP can choose to not declare certain income as taxable, in hopes that the Minister will not disagree upon consideration.

[19] However, only because it is a publicly traded company, by an authority other than under the Act, BP Canada is required to create accounting entries known as “reserves” which represent the tax and interest that may be payable if its decisions prove to be incorrect. The accounting entries are the working papers required to be kept, which include the Issues Lists that identify the tax issues concerning the undeclared income.


[23] First, as to the Minister not needing the Issues Lists to conduct and conclude a comprehensive and complete audit. This might very well be true, except for the fact that the Minister wants them, not only to expedite the audit process, but also for use in its continuing and future auditing of BP Canada. The need is for the Minister to determine; this point is clearly stated in the Minister’s policy statement of May 10, 2010.

[24] Second, as to the Minister’s use of the Issues Lists as offending Canada’s self-reporting tax system by instituting a system of self-auditing. I am unable to give any weight to this argument. The “conscription of the taxpayer” argument is not apt to the facts of the present case. The Issues Lists were prepared, reflecting an opinion on tax liability based on a choice to create the reserve. The Minister is only asking for the disclosure of the Issues Lists already prepared and is not asking for anything to be prepared. In my opinion, to do so does not instigate the “self‑audit” illustrated in the analogy.


[38] First, with respect to the fishing expedition argument, in my opinion, an audit is not an expedition. In particular, in the course of the audit of BP Canada, the Minister focussed on a specific issue: the contents of the Issues Lists of the tax accrual working papers. Therefore, the Minister’s interest was specifically to obtain a clear roadmap to be used for current and future audits.”

Canada (National Revenue) v. BP Canada Energy Company 2015 FC 714

Robert Robillard, Ph.D., CPA, CGA, Adm.A., MBA, M.Sc. Econ., M.A.P.
Senior Partner, RBRT Inc.
514-742-8086; robertrobillard “at”

The convergence of RBRT’s tax, accounting and economics expertise makes a difference. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. RBRT Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from RBRT Inc. as required.