The Canada Revenue Agency has released an update to the Voluntary Disclosures Program (IC00-1R7) aimed at improving access for delinquent taxpayers. The new policy will apply to applications received on or after October 1, 2025.
The new VDP policy eliminates the "General" and "Limited" programs. The extent of relief will now depend on whether the VDP application was "unprompted" or "prompted". An "unprompted" application is made when there has been no communication about an identified compliance issue related to the disclosure or an application has been made following an education letter or notice offering general guidance and filing information. A "prompted" application is one made following verbal or written communication (excluding education letters) about an identified compliance issue related to the disclosure that identifies specific errors or omissions or contains a deadline to correct an error or omission, or one made after the CRA had already received information from third party sources regarding the potential involvement of a specific taxpayer (or of a related taxpayer) in non-compliance. The VDP program still may not be used if an audit or investigation has been initiated against the taxpayer or a related taxpayer.
Unprompted applications are normally eligible for 75% relief of applicable interest and 100% relief of applicable penalties. Prompted applications are normally eligible for 25% relief of applicable interest and "up to" 100% relief of applicable penalties. The old VDP policy granted interest relief in respect of assessments for years preceding the three most recent years of returns required to be filed. The old VDP policy only granted relief for gross negligence penalties under the "Limited" Program.
To use the VDP program, the application still must include information that relates to a tax year that is at least one year past the due date for filing. Restrictions on the use of the VDP were carried to the new policy. For example, the VDP program cannot be used to make or alter an election or to seek relief for penalties and interest that have already been assessed.
The changes to the VDP program for GST/HST matters are largely consistent with the changes for income tax matters. Updated GST/HST Memorandum 16-5-1 contains the prompted/unprompted categories of applications. A third category covers wash transactions. These transactions qualify for 100% relief of the applicable penalties and interest where the transaction would be eligible for a reduction of penalty and interest under the GST/HST Memorandum 16-3-1. An application must include information that relates to a reporting period that is at least one period past the due date for filing.
IC00-1R7 is found at the following link:
IC00-1R7 Voluntary Disclosures Program - Canada.ca
Originally posted on LinkedIn on September 10, 2025
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Ryan Minor
Chartered Professional Accountants of Canada
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