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Apr 22, 2022

Tax Court Allows Unclaimed Rebates for Tax Paid in Error to Subcontractors

Louise R. Summerhill and Monica Carinci

On March 17, 2022, The Tax Court of Canada allowed the GST/HST appeal of Mediclean Incorporated (“Mediclean”), a professional cleaning service company that engages cleaners as subcontractors to provide these services. In the years at issue, Mediclean paid all of its subcontractors GST/HST and claimed input tax credits for the subcontractor expense. However, some of the subcontractors were not registrants for the purposes of the Excise Tax Act. Mediclean was reassessed to deny the input tax credits claimed. On appeal, the Tax Court found that the GST/HST paid by Mediclean to non-registrants was paid in error, and Mediclean was entitled to rebates equal to the input tax credits against net sales tax pursuant to sections 261 and 296(2.1) of the Excise Tax Act. The Tax Court also held that certain periods at issue were statute-barred and gross-negligence penalties were not justified in the circumstances. The result was a complete win for Mediclean.

Aird & Berlis represented Mediclean with a team including Louise Summerhill and Monica Carinci.

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