In Minister of National Revenue v. BP Canada Energy Company, 2015 FC 714, the Federal Court ordered BP to hand over tax accrual working papers that the Canada Revenue Agency (CRA) requested in the course of its audit. Tax accrual working papers describe uncertain tax positions, for which publicly traded companies must create accounting reserves consisting of the tax and interest that may be payable if that position is found to be incorrect. Both BP and the Minister agreed that the working papers provide a “roadmap” to target audit resources on issues of concern.
BP argued unsuccessfully that the working papers fell outside the CRA’s audit power under subsection 231.1(1) of the Act. Among other things, BP argued that, while the working papers represented the taxpayer’s subjective views regarding potential tax risk, the CRA does not need this information to conduct a complete audit. However, the Court agreed with the CRA that the papers could assist in expediting the audit process, and in future audits of BP. The Court also rejected a number of other argument brought forward by BP.