Rojas – Tax Court of Canada finds that the (r.4) (preparatory/in conjunction) exclusion from GST/HST-exempt financial services does not apply where there is a single supply of a financial service

An individual worked as an agent (rather than employee) for a mortgage brokerage firm, so that she determined whether the customer qualified for a mortgage, identified potential lenders and processed the application - and then received 75% of the resulting client commission as her compensation. Although under the older aspects of the financial services definition, her activities would have qualified as arranging for the lending of money, CRA argued that para. (r.4) of the financial service definition now rendered her commissions subject to HST. This exclusion is stated to apply inter alia where the service in question (such as "customer assistance") is preparatory to the provision of an “arranging for” financial service or is provided “in conjunction” with that service.

In finding that (r.4) did not apply (so that her commissions were HST-exempt), D’Arcy J stated:

[P]aragraph (r.4) will only apply if the service in question is supplied separately from the [arranging] supply… .

[T]he Appellant only made one supply, the supply of arranging for the lending of money. She did not make a second separate supply that could be found to have been preparatory to or provided in conjunction with the supply of the service of arranging for the lending of money.

As most financial service supplies are single supplies, this approach (and the similar approach in Global Cash Access – see also Great-West) does not give (r.4) much scope to operate.

Neal Armstrong. Summary of Rojas v. The Queen, 2016 TCC 177 under ETA s. 123(1) – financial service – para. (r.4).