When taxpayer relief, CPP limitation periods, and procedural finality abandon fairness without a remedy

Introduction

David J Rotfleisch, CPA, JD is the founding tax lawyer of Taxpage.com and Rotfleisch & Samulovitch P.C., a Toronto-based boutique tax law corporate law firm.

In Tolley v. The King, 2026 TCC 14, the Tax Court of Canada examined whether a taxpayer can obtain an extension of time to file a notice of objection after the Canada Revenue Agency reassessed multiple taxation years to implement a retroactive employment reclassification. The Court also considered the refusal to refund excess Canada Pension Plan contributions for two of those years because the Canada Pension Plan limitation period had expired.

The taxpayer attempted to object to the 2011, 2012, and 2013 tax reassessments, arguing that the refund denial was unfair and practically unavoidable, as amended T4 slips were issued only after the relevant deadlines had passed. The Court held that it lacked jurisdiction to grant any extension because the 2011 and 2012 reassessments were issued under the Income Tax Act's taxpayer relief regime in subsection 152(4.2), which triggered the statutory bar in subsection 165(1.2) that eliminates the right to object — thereby also removing the procedural gateway needed for a Tax Court appeal.

The application originated from tax reassessments issued for the taxpayer's 2011, 2012, and 2013 taxation years after the CRA determined that the taxpayer — one of about 80 affected workers employed by the Government of Saskatchewan — did not meet the criteria to be classified as an independent contractor. Although the reassessments reflected the taxpayer's requested T1 adjustments to change reported business income to employment income, the practical dispute was centered on the Canada Pension Plan implications of that correction. The Province agreed to cover both the employer and employee portions of Canada Pension Plan contributions, resulting in excess contributions previously paid by the taxpayer as a "self-employed" individual. However, the CRA argued that refunds for 2011 and 2012 were discretionary and could be denied because the taxpayer's written application was not submitted within the four-year period specified in subsection 38(4) of the Canada Pension Plan.

Instead of focusing on employment status characterization, arithmetical errors, or tax reassessment mechanics, the case turned on a sharper procedural question with broad practical implications: can a taxpayer revive objection rights through an extension-of-time application when Parliament has expressly removed the right to object to tax reassessments issued under subsection 152(4.2)? The taxpayer argued that earlier correspondence should be treated as a timely notice of objection and that fairness demanded flexibility where delay was driven by governmental process rather than taxpayer indifference. The CRA responded that the Court could not entertain an objection — timely or not — because subsection 165(1.2) bars objections to taxpayer relief tax reassessments, and subsection 169(1) makes a valid objection a strict precondition to appeal jurisdiction.

The Tax Court rejected the taxpayer's position. Relying on settled authority, the Court held that when the Income Tax Act removes the right to object entirely, there is nothing to extend: an extension of time cannot revive a right that Parliament has explicitly extinguished. The Court considered the 2013 year as unnecessary to extend in practical terms, because the relief sought for that year had already been granted, and the taxpayer raised no specific concerns regarding that year, and refused to extend time for an objection that the taxpayer did not substantively advance.

Tolley is therefore not just about missed deadlines. It is about the limits of taxpayer relief, the finality of CRA discretion, and the consistent jurisdictional rules of Canadian tax litigation: without a valid objection right, there is no route to the Tax Court, no matter how strong the equities. For taxpayers dealing with retroactive employment reclassifications, multi-year adjustments, or Canada Pension Plan overcontribution issues, the case highlights the importance of early strategic advice from an experienced Canadian tax lawyer.

Taxpayer Relief at the Time of Reassessment: Why fairness and administrative delay do not preserve objection rights

A key lesson from Tolley is that a taxpayer's procedural rights are fixed at a specific and legally crucial moment: when the CRA issues a notice of tax reassessment under the taxpayer relief provisions of subsection 152(4.2) of the Income Tax Act, and the taxpayer receives it. Although this provision is often misunderstood as a remedial or equitable tool, the Court confirmed that it functions within a strict statutory framework. Once relief is granted through a tax reassessment issued outside the normal reassessment period, subsection 165(1.2) automatically prevents any objection to that reassessment. Procedural fairness, administrative delay, or even government-caused impossibility do not change that statutory rule.

The decision underscores a common misconception among taxpayers and advisors: that the availability of taxpayer relief maintains, or can exist alongside, normal objection and appeal rights. In Tolley, the taxpayer did not challenge the substantive accuracy of the tax reassessments themselves, which reflected his requested T1 adjustments following the retroactive reclassification of employment. Instead, his complaint stemmed from the CRA's refusal to refund excess CPP contributions for 2011 and 2012 because the four-year limitation period under the Canada Pension Plan had expired. The taxpayer contended that this was unfair, especially since amended T4 slips were issued only after the relevant CPP deadlines had passed, rendering timely compliance impossible.

The Court clarified that, regardless of how compelling specific considerations may be, they cannot override the procedural framework of the Income Tax Act. When a tax reassessment is issued under subsection 152(4.2), the taxpayer's right to object is extinguished automatically by law, not at the discretion of CRA. Consequently, the Tax Court indicated that applying to extend the time to object under section 166.2 is essentially unavailable because an extension cannot restore a right that no longer exists. Therefore, the Tax Court chose not to conduct a detailed analysis of whether prior correspondence could constitute a notice of objection, as that question was rendered moot by the statutory prohibition itself.

Why frustration, administrative delay, and equitable hardship cannot revive lost objection rights

A recurring argument raised by taxpayers facing adverse procedural outcomes is that unforeseen events — such as administrative delays, conflicting government positions, or statutory timing mismatches — should excuse strict adherence to objection deadlines and preserve access to the Tax Court. In Tolley, the Tax Court clearly rejected that argument. The Court clarified that frustration, however genuine, is not an independent ground for restoring objection rights once Parliament has explicitly removed them. When a tax reassessment is issued under the taxpayer relief provisions of subsection 152(4.2), the loss of objection rights under subsection 165(1.2) occurs automatically and cannot be reversed.

The taxpayer in Tolley argued that post-tax reassessment events beyond his control effectively trapped him. Amended T4 slips were issued only after the four-year Canada Pension Plan limitation period had expired, making it impossible to apply for mandatory refunds under subsection 38(4)(b) of the Canada Pension Plan. He contended that this administrative reality should entitle him to procedural flexibility, especially since the tax reassessments were initiated to correct government-driven errors in employment classification. The Court acknowledged the apparent unfairness of the outcome but held that such frustration does not affect the procedural machinery of the Income Tax Act. Without a right to object, frustration has nothing upon which to act.

The Court further emphasized that developments after a tax reassessment — regardless of how convincing — cannot alter the legal status of a taxpayer's relief from tax reassessment retroactively. Once the CRA exercises discretion under subsection 152(4.2), the tax reassessment becomes part of a distinct statutory category, protected from objection and appeal. While equitable hardship might influence policy discussions or executive remedies, it cannot reopen a jurisdictional door that the Income Tax Act has closed. In this way, Tolley signifies a broader principle in Canadian tax jurisprudence: procedural finality is not eased by sympathy, even if the taxpayer's difficulties stem from administrative delays rather than the taxpayer's fault.

Tolley concludes that arguments based on frustration, delay, and fairness may justify why a taxpayer's position is reasonable, but they cannot override a procedurally barred challenge. Once objection rights are exhausted, the Tax Court lacks jurisdiction to intervene, and any available relief must be sought outside the judicial process. As noted in the Court's postscript, this includes the fact that the Tax Court cannot order CPP refunds under subsection 38(4), and any remaining remedy would be outside the appeal process, potentially including executive relief such as remission.

The decision reminds us that, in Canadian tax litigation, equitable arguments cannot substitute for statutory authority, and hardship arising after a tax reassessment cannot revive rights that Parliament has chosen to withhold. 

David J Rotfleisch, CPA, JD is the founding tax lawyer of Taxpage.com and Rotfleisch & Samulovitch P.C., a Toronto-based boutique tax law corporate law firm and is a Certified Specialist in Taxation Law who has completed the CICA in-depth tax planning course. He appears regularly in print, radio and TV and blogs extensively.  

With over 30 years of experience as both a lawyer and chartered professional accountant, he has helped start-up businesses, cryptocurrency traders, resident and non-resident business owners and corporations with their tax planning, with will and estate planning, voluntary disclosures and tax dispute resolution including tax audit representation and tax litigation. Visit www.Taxpage.com and email David at david@taxpage.com.

Read the original article in full on Tax Law Canada. Author photo courtesy Rotfleisch & Samulovitch P.C. Top image: iStock 928158772. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.