Late T1135, VDP, no taxes owing

[ezgrower]

I've been working on 2024 taxes and I've just realized that I should have filed 2022 and 2023 T1135 for a U.S. bank account (>CA$100k, <200k). This was an unintentional mistake. I was not attempting to conceal any income or assets; I reported the interest generated on T1 in each year, and total income was low enough that no taxes were owing.

I will file 2024 T1135 using simplified method, and I would like to correct my 2022 and 2023 error. If I simply file the forms late, I will be assessed a $2,500 penalty plus interest for each tax year. Using the Voluntary Disclosure Program has the potential to provide relief from this penalty and interest. My application would meet all five criteria for validity (voluntary, complete, potential penalty, etc.) Reading the Income Tax Information Circular, IC00-1R6 - Voluntary Disclosures Program, raises a question for me, though:

" Circumstances Where Relief Will Typically Not be Considered
23. While special situations will be considered on a case-by-case basis, the following applications will generally not be considered under the VDP:
- applications that relate to income tax returns with no taxes owing or with refunds expected; these would be handled using normal processing procedures."

My returns had no taxes owing, and the submission of the T1135s wouldn't change that. The normal processing procedures would be to simply file the forms late and appeal the automatic penalty using Form RC4288, Request for Taxpayer Relief. CRA publications and case law suggests my waiver requests would be denied because "I didn't know" isn't considered a valid justification.

Would my VDP be rejected because I owed no taxes? That would seem to go against the stated principal of the VDP of promoting "compliance with Canada’s tax laws by encouraging taxpayers to voluntarily come forward and correct any previous errors or omissions in their tax affairs."

Furthermore, on the principal of "fairness", the VDP seeks "to ensure that taxpayers who are fully compliant are not worse off economically than those seeking to correct their affairs through this program". Accepting my VDP would not make me better off financially. However, by rejecting my VDP, I would be worse off than than those with similar applications (unintentional late filing of T1135, but all income was fully reported), but who had taxes owing. Would I be penalized for the sin of not having enough income? That's strikes me as patently unfair.

Am I reading this correctly or am I missing something?

[ezgrower]

Update:

Just got off the phone with CRA. The above quote regarding "Circumstances Where Relief Will Typically Not be Considered" applies when the disclosure is a correction to the tax return itself, not to T1135 which is a completely separate information return. Was reassured that my situation is not uncommon and that the probability of acceptance is high.

One recommendation he made to me was to file RC-199 (VDP) and the overdue T1135s as soon as possible (online through MyAccount on CRA website is fastest) and wait until confirmation of their receipt before filing 2024 T1135, otherwise there is the slight possibility that a request for previous T1135s will be triggered. You don't want that to happen before they receive your VDP - it will be denied. Confirmation of receipt should take about 3 weeks, he thought. He also said that their wait times for completing review of VDPs is down to about 8 months.