SMEs likely to face audits

Every year, tens of thousands of small and medium-sized Canadian businesses will learn that they are to be audited by the Canada Revenue Agency (CRA). Some sectors are more likely to face an audit than others, especially in industries that are known to be less compliant, but precisely how the CRA determines which businesses will be audited is understandably kept under wraps.

However, there are several factors which can make a business much more likely to fall under the scrutiny of the CRA. Businesses that do a significant proportion of their transactions in cash, for example, inevitably get a little more attention.

Audits in various industries

One ARAG client, who holds the franchise for a number of fast-food restaurants, was singled out despite the company’s accountants filing an accurate tax return, in good time. The CRA was investigating potential unreported income and launched an audit. The business owner contacted ARAG and we opened a claim, appointing specialist accounting professionals to work with him and his own accountants, through to the conclusion of the audit.

Restaurants and other businesses in the hospitality sector are a good example, but there are numerous other types of business that come to the CRA’s attention for the same reason, and various other factors that could equally increase an organisation’s chances of facing an audit.

Another ARAG client, a plumbing contractor, was contacted by the CRA and asked to pay tax on an additional half a million dollars of income, going back over three years. Again, we appointed legal and financial representation with experience handling this sort of case, to guide the firm through the audit process.

Tax protection through LEI

For many business owners, the stress of facing a CRA audit is as much about the additional work as the possibility that auditors might actually find something amiss. As well as their own valuable time, there is also the additional cost of instructing accountants who are familiar with the process and protocols.

This is why tax protection is such a popular feature of LEI policies throughout the world. Knowing that experts are available for the business to call upon should they be needed, and that the bill will be covered, is highly reassuring for clients.

 

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