Engagement Letters For Tax Practitioners Template for Canada

CPA Canada's Code of Professional Conduct requires members to document the scope of engagements in writing. Beyond professional obligations, an engagement letter protects both the practitioner and the client by clearly defining what services will be performed, what the client must provide, the fee arrangement, and the limits of the practitioner's liability for errors or omissions.

It should identify the parties, describe the specific services (T1, T2, GST/HST, payroll remittances, etc.), state the applicable tax years, describe the client's obligations to provide complete and accurate information, set out the fee structure and payment terms, include a liability limitation clause, describe the dispute resolution process, and be signed by both parties before work begins.

Yes. Courts in Canada generally uphold liability limitation clauses in professional engagement letters provided they are clearly drafted, prominently displayed, and agreed to before the engagement commences. Many Canadian accounting firms cap liability at the fees paid for the engagement. However, clauses that exclude liability for gross negligence or fraud are unlikely to be enforced.

Professional services provided by tax practitioners are generally taxable supplies for GST/HST purposes. Practitioners registered for GST/HST (mandatory if annual taxable revenues exceed $30,000) must charge GST (5%) or the applicable HST rate in the client's province and remit it to the CRA. The engagement letter should state whether quoted fees are inclusive or exclusive of GST/HST.

A tax practitioner discovering errors in returns not covered by the current engagement should disclose this to the client and recommend correcting the returns through a T1-ADJ (adjustment request) or voluntary disclosure programme. The engagement letter should clarify that identifying and correcting prior-year errors is a separate scope item requiring a new or amended engagement, with additional fees if applicable.

The letter should confirm that client information will be kept confidential in accordance with CPA Canada's Code of Professional Conduct and PIPEDA. Exceptions (such as disclosure required by law, CRA audit requests, or quality-review processes by regulatory bodies) should be listed explicitly. Electronic storage and file-sharing practices that comply with PIPEDA's security requirements should also be mentioned.

Yes. Corporate engagement letters should specify the taxation year covered, address T2 return preparation, HST filings, and any SR&ED (scientific research and experimental development) credits if applicable. They should also address access to corporate financial records, the controller or CFO contact, and any related entities whose tax affairs may be in scope. Personal return letters focus on T1, RRSP, and investment income.

A practitioner can withdraw if the client fails to provide required information, does not pay fees as agreed, or if continuing the engagement would place the practitioner in a conflict of interest or require them to facilitate non-compliance with the Income Tax Act. The engagement letter should specify the conditions for withdrawal, reasonable notice requirements, and client obligations on termination, such as returning original documents.