Principal Issues: Whether the reimbursement by an insurance corporation to an employee claimant to fix an error is a taxable employment benefit under 6(1)(a); in particular, a reimbursement of income tax, interest, penalties and accounting fees. Whether it makes a difference if the plan is a formally-insured one, or an administrative services only one.
Position: The reimbursement of income tax, interest and penalties will generally result in a taxable benefit for an employee. With regards to the accounting fees, it is the general position of the CRA that the reimbursement of an expense that would otherwise be deductible under the Act does not result in a taxable benefit unless there is a specific provision that requires otherwise. The general views of the CRA are not dependent on the type of plan.
Reasons: Income tax, interest and penalties are personal expenses. While the accounting fees are a personal expense, there may be a deduction available for the employee under 60(o) of the Act.