The Voluntary Disclosures Program: Correcting a Return Before the CRA Finds It

Most of the tax problems I am asked to fix are not schemes. They are a foreign account nobody knew had to be reported, three years of crypto disposals that were never picked up, or source deductions a corporation quietly stopped remitting during a bad quarter and never caught up on.

The question is always the same. What happens if we just file it now?

The answer runs through the Voluntary Disclosures Program, and the program was rewritten with effect from 1 October 2025. If you have read anything about the VDP written before that date, some of it is now wrong in your favour.

What the VDP actually buys you

The VDP is a relief program, not an amnesty. The CRA is explicit on what the program is: a successful application gets you relief from penalties, relief from part of the interest, and relief from criminal prosecution. You still pay the tax.

That distinction matters more than people expect. On a decade of unreported foreign income, the tax is the smallest of the three numbers you are afraid of. Gross negligence penalties and compounded arrears interest are what turn a manageable correction into an unpayable one, and those are exactly what the program addresses.

It is also a different tool from the two things it gets confused with. Taxpayer relief under subsection 220(3.1) asks the CRA to waive interest and penalties that have already been assessed, usually for hardship or CRA delay, and I have set that out in applying for taxpayer relief. An objection disputes an assessment you think is wrong, covered in objecting to a reassessment. The VDP is for something you got wrong and want to correct before anyone asks.

The two relief tiers, new since October 2025

The old program had a single standard track. The new one splits applications by whether the CRA had already nudged you, and the changes page sets out both tiers.

The important change is not the percentages. It is that a prompted taxpayer is now eligible at all. Under the previous policy, a CRA letter about unreported income or ineligible expenses could knock you out of the program entirely. Today it moves you to a lower tier rather than closing the door.

Two categories remain excluded: taxpayers already under audit or investigation on the matter being disclosed, and those the CRA considers to have been egregiously non-compliant. The gap between “received a letter” and “under audit” is now the most valuable window in the whole process, and it is not a wide one.

The five conditions, all of which apply

The eligibility page sets out a checklist of five conditions. An application has to satisfy every one of them.

1. It is submitted before an audit or investigation has started against you or a related taxpayer regarding the information being disclosed.
2. It includes all relevant information and documentation for the required tax years or reporting periods.
3. The information involves an error or omission that carries interest or penalties, or both.
4. The information is at least one year, or one reporting period, past its filing due date.
5. It includes payment of the estimated tax owing, or a request for a payment arrangement.

Condition five is the one that stops people. If the estimated balance is beyond reach, the answer is not to delay the application. It is to file it with a payment arrangement request, which the CRA considers separately. The mechanics of those arrangements are in CRA payment arrangements.

Condition two has a defined scope. The CRA asks for documents covering the most recent ten years for foreign-sourced income or assets, six years for Canadian-sourced income or assets, and four years for GST/HST. Years inside those windows with nothing wrong in them do not need to be included, and the CRA may still ask for more beyond them.

What the program will not do

Some applications fail on subject matter rather than conduct. You will typically not get relief where the disclosure produces a refund or no tax owing, where it only increases input tax credits or rebates without a matching increase in tax, where you are asking about penalties and interest already assessed, where you want to make or change an election, or where there is an insolvency event in the years covered.

That first one catches people. The VDP is not a route to fix a return in your own favour. It exists for balances owing.

Deciding whether to apply

Is there an error or omission at least one year past its due date?
│
├── No  → Not a VDP matter yet. File correctly and on time.
│
└── Yes
    ├── Are you already under audit or investigation on it?
    │   │
    │   ├── Yes → The VDP is closed. Your route is cooperation
    │   │         through the audit, then an objection if the
    │   │         assessment is wrong.
    │   │
    │   └── No
    │       ├── Has the CRA contacted you about it, for
    │       │   example an education letter?
    │       │      → Eligible, at the partial relief tier.
    │       │        Move quickly, before it becomes an audit.
    │       │
    │       └── Nobody has contacted you?
    │              → Eligible, at the general relief tier.
    │                This is the best position available.
    └── Unsure which side of the line you are on?
           → Request a pre-disclosure discussion first.

The pre-disclosure discussion

If you are not sure whether to apply, the CRA allows an anonymous pre-disclosure discussion about your situation before you identify yourself. It is informal and non-binding, it does not guarantee relief, and it does not stop the CRA from auditing or prosecuting. What it gives you is a read on how the program is likely to treat your facts before you commit them to paper.

The application itself is Form RC199, which was simplified as part of the same October 2025 update. The governing policy is Information Circular IC00-1R7 for income tax, with a parallel GST/HST memorandum. Applications received before 1 October 2025 are still reviewed under the older policy.

Where this comes up in practice

Three patterns account for most of the disclosures I see.

Unreported crypto disposals. Exchanges now report to the CRA, and the matching runs backwards through years the account holder assumed were closed. What the platforms hand over is set out in what exchanges report to the CRA.

Foreign property that crossed the reporting threshold. The T1135 obligation turns on the cost of specified foreign property rather than its income, which is why it is missed by people who had no foreign income to report. See the T1135 guide.

Unremitted source deductions. This one has a second edge. Amounts withheld from employees are trust funds, and a director can be personally assessed for them, as set out in director liability for unremitted CRA amounts. Fixing it voluntarily is materially cheaper than being found.

The common feature is time. Every one of these gets worse the longer it sits, and the window closes the moment an audit opens rather than when you feel ready.

If you are sitting on returns you know are wrong, send me the years involved, whether the CRA has contacted you about them, and a rough estimate of the tax at stake. I will tell you whether the VDP is open to you, which relief tier you are likely to land in, and what the application needs to contain before it goes in. Get in touch.