Payroll compliance review (CRA payroll audit)
A payroll compliance review is a check of whether an employer deducted, remitted and reported payroll amounts correctly. The CRA’s employer guide speaks of auditing records and then sending a notice of assessment, which the employer can appeal if it disagrees.
A buyer meets this when the target’s payroll history is in question. The CRA’s own guide uses the word “audit” rather than “payroll compliance review”, so this entry describes the process in the guide’s terms. See what employment liabilities you inherit when you buy a business.
What the sources say
The guide says that after auditing the records, the CRA sends a notice of assessment. It says an employer that disagrees with a payroll assessment for CPP contributions, EI premiums or income tax has 90 days after the date of the notice to appeal, and that records must be kept for at least six years after the year to which they relate. The Income Tax Act, section 227(9.4), makes a person who failed to remit, as and when required, an amount deducted or withheld from a payment to another person liable to pay it as tax on behalf of that person.
What to ask
- Whether the CRA has audited the target’s payroll, for which years and with what result.
- Whether any notice of assessment or appeal is open.
- Whether the target’s payroll records go back as far as the guide requires.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentEmployers’ Guide – Payroll Deductions and Remittances
- 02Government of CanadaGovernmentIncome Tax Act, R.S.C. 1985, c. 1 (5th Supp.)
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