Ontario Resident Sentenced for Fraudulent SR&ED and OITC Claims

The Canada Revenue Agency (CRA) released an Enforcement Notification on October 19, 2022, which stated that:

Christopher Bernier, also known as Christopher-Maik Bernier (Bernier), of McDonalds Corners, Ontario, was sentenced on October 6, 2022, to a conditional jail sentence of 12 months, including 6 months of house arrest, and 70 hours of community service for federal tax offences under the Excise Tax Act. In addition, he received 12 months of probation for provincial offences under the Provincial Offences Act of Ontario to run concurrently with the conditional jail sentence. Mr. Bernier was also fined a total of $190,100 representing 50% of the amount of Goods and Services Tax/Harmonized Sales Tax (GST/HST) and the Ontario Innovation Tax Credits (OITC) claims he obtained or tried to obtain as refunds.1

The Ontario Innovation Tax credit (OITC) is an 8% refundable tax credit for qualified expenditures on Scientific Research and Experimental Development (SR&ED) performed in Ontario. 

Mr. Bernier pleaded guilty on September 28, 2022, in the Ottawa Court House to three counts of unlawfully making false or deceptive statements and obtaining or attempting to obtain GST/HST refunds of$160,050 under the Excise Tax Act, and to three counts of making false or deceptive statements and obtaining or attempting to obtain OITC refunds of $220,150 under the Taxation Act of Ontario.

A CRA investigation revealed that Mr. Bernier, as shareholder and senior officer of American Domain Names LLC (ADN) and Maple Names Inc. (MNI), filed false GST/HST returns, corporate income tax returns and SR&ED claims. Between July 2013 and July 2015, Mr. Bernier also submitted false documents in order to receive or attempt to receive a total of$160,050in GST/HST refunds and$220,150in OITC refunds to which he was not entitled. Mr. Bernier claimed that MNI was developing the integration of computers and mobile devices into various household devices, and that ADN was developing encryption hardware for sale to internet service providers. When the CRA asked for documentation to support these claims, Mr. Bernier provided false information and submitted fabricated invoices.2

Mr. Bernier claimed that MNI was developing the integration of computers and mobile devices into various household devices, and that ADN was developing encryption hardware for sale to internet service providers. When the CRA asked for documentation to support these claims, Mr. Bernier provided false information and submitted fabricated invoices.

The CRA warned taxpayers of the following:

Tax evasion is a crime. Falsifying records and claims, wilfully not reporting income, or inflating expenses can lead to criminal charges, prosecution, jail time, and a criminal record. From April 1, 2021, to March 31, 2022, there were 23 convictions, with court imposed fines totalling $3,303,110. These taxpayers were sentenced for wilfully evading payment amounts totalling $4,407,386 in federal tax. Out of the 23 convictions, 10 individuals were sent to jail for a total of 15.3 years.3

Ontario Innovation Tax Credit Program

To be eligible for OITC claimants must meet all of the following conditions:

Any corporation wishing to claim the OITC must operate permanently out of Ontario during the tax year. It appears ADN not only operates outside of Ontario but outside of Canada as well and is therefore ineligible for OITC and SR&ED tax credits. The U.S. has their own R&D Tax Credit program which U.S. companies should investigate if they wish to. For more information on OITC and other provincial tax incentive programs see Provincial Tax Credits: Making the Most of SR&ED.

Conclusion

Be aware that the CRA is aggressively pursuing the crime of tax evasion, and false claims with all the tools available to it. Fraudulent SR&ED and OITC claims are being discovered and prosecuted. Any individual or business who underreports income or claims losses or benefits to which they are not entitled may have to repay the benefit amounts and may be subject to other possible action. The CRA previously released a reminder for businesses filing SR&ED claims in April 2022 which reminded taxpayers to ensure the information they provide on their tax returns is valid and warned them of the consequences. Be sure your SR&ED claim can be properly backed up in the case that your SR&ED claim is pulled for review. The importance of contemporaneous documentation cannot be overstated.

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Show 4 footnotes

  1. Government of Canada. (October 19, 2022). Eastern Ontario resident sentenced for fraudulent GST/HST refunds, Scientific Research and Experimental Development claims. Retrieved October 20, 2022, from: https://www.canada.ca/en/revenue-agency/news/newsroom/criminal-investigations-actions-charges-convictions/20221019-eastern-ontario-resident-sentenced-fraudulent-gsthst-refunds-scientific-research-experimental-development-claims.html.
  2. ibid.
  3. Government of Canada. (October 19, 2022). Eastern Ontario resident sentenced for fraudulent GST/HST refunds, Scientific Research and Experimental Development claims. Retrieved October 20, 2022, from: https://www.canada.ca/en/revenue-agency/news/newsroom/criminal-investigations-actions-charges-convictions/20221019-eastern-ontario-resident-sentenced-fraudulent-gsthst-refunds-scientific-research-experimental-development-claims.html.
  4. Government of Canada. (May 16, 2022). Ontario innovation tax credit. Accessed October 20, 2022, from: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/provincial-territorial-corporation-tax/ontario-provincial-corporation-tax/ontario-innovation-tax-credit.html.

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