20 June 2001 External T.I. 2001-0081065 - SOCIAL ASSISTANCE

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Tax treatment under paragraph 81(1)(h) of the Act of payments under a specific program.

Position TAKEN:

Exempt under paragraph 81(1)(h) based on information provided.

Reasons:

Consistent with CCRA policy for years after 1997.

		2001-008106
XXXXXXXXXX 	2001-008209
T. Young, CA
June 20, 2001

Dear XXXXXXXXXX:

Re: Exemption under paragraph 81(1)(h) of the Income Tax Act (the "Act")

This is in reply to your letters of April 17, 2001, to us and to XXXXXXXXXX of the Client Services Directorate of the XXXXXXXXXX Tax Services Office, which provided additional information on payments made to caregivers by XXXXXXXXXX.

In your letter, you stated that the conditions of paragraph 81(1)(h) of the Act have been met in the following manner:

1. Payments are made on the basis of need.

2. Payments are made through one of the Persons with Developmental Disabilities boards, which are governed by the Persons with Developmental Disabilities Community Governance Act.

3. Payments are received by the caregiver for the benefit of the cared-for individual.

4. The cared-for individual is not the spouse or otherwise related to the caregiver.

5. No family allowance or any allowance is provided by provincial law in respect of the cared-for individual.

6. The cared-for individual lives in the primary residence of the caregiver. The caregiver's principal place of residence is maintained for use as the cared-for individual's residence. The caregiver has the use of 100% of the home.

Based on these assertions and on the contract template that you provided, you have asked us to confirm that payments made by XXXXXXXXXX would be non-taxable, non-pensionable for purposes of the Canada Pension Plan ("CPP") and non-insurable for purposes of the Employment Insurance ("EI") Act.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4, dated January 29, 2001 (copy enclosed). As we stated in our letter of April 5, 2001, questions relating to an ongoing program, such as yours, should be directed to the Calgary Tax Services Office. However, we can provide you with the following comments.

Based on the above summary of how your program works, it is our view that payments made by XXXXXXXXXX under the contracts would not be included in income by virtue of paragraph 81(1)(h) of the Act.

Subsection 12(1) of the CPP Act defines contributory salary and wages of a person for a year to be the person's salary and wages as computed in accordance with the Income Tax Act. Payments that are not included in income pursuant to paragraph 81(1)(h) of the Act are excluded from income. Consequently, the payments would not be pensionable for purposes of the CPP.

With respect to EI, it appears that it is the intention of XXXXXXXXXX that no employer-employee relationship exists between XXXXXXXXXX and the contractor. Whether an employer-employee relationship exists between two parties is a question of fact and can only be determined based on the actual facts of a given situation. If you are unsure if an employer-employee relationship exists between XXXXXXXXXX and a specific contractor, you can request a ruling from the XXXXXXXXXX Tax Services Office using form CPT1, "Request for a Ruling as to the Status of a Worker under the Canada Pension Plan or Employment Insurance Act". However, providing that the actual contracts between XXXXXXXXXX and the contractors are consistent with the contract template and providing that the actual relationship between XXXXXXXXXX and the contractors is consistent with those contracts, the payments by XXXXXXXXXX would not be insurable earnings for purpose of the EI Act.

We note that the contract template allows for the services to be provided in either "the (caregiver's) home, or the home of the (cared-for individual) as long as this is the primary residence of both of them". In your letter of February 13, 2001, you stated that, in the latter situation, the caregiver would pay board to the cared-for individual. We would like to point out that this could result in the cared-for individual receiving rental income. In these situations, the cared-for individuals may wish to contact a tax advisor. Additional information can also be found in Guide T4036 "Rental Income Tax Guide 1999".

The publications and forms referred to in this letter may be obtained from the XXXXXXXXXX Tax Services Office or from our Internet web site (www.ccra-adrc.gc.ca).

We trust our comments will be of assistance to you. If you have any further questions, please contact XXXXXXXXXX Tax Services Office.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch