1 March 1994 External T.I. 9402225 - HAA7278-1 RETIRING ALLOWANCE RETURN TO EMPLOYMENT

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:

Return to employment after retirement

Position TAKEN:

Routine explanatory letter

Reasons FOR POSITION TAKEN:

Routine

XXXXXXXXXX 5-940222

Attention: XXXXXXXXXX

March 1, 1994

Dear Sirs:

Re: Retiring Allowance

This is in reply to your letter of January 27, 1994, concerning the payment of severance to employees who may be called back to work for the employer.

Since the subject of your enquiry appears to relate to a factual proposal, we are unable to provide you with any specific comments at this time. Confirmations of the tax implications in particular situations may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in the Department's Information Circular 70-6R2.

While we are unable to address your specific situation, we can offer the following general comments on this topic.

Generally, where an individual is rehired (on a casual, part-time or contract basis) by a former employer or an affiliated employer, shortly after leaving an office or employment, the individual will be considered not to have retired or suffered a loss of employment or office. However, where, an employee has retired (or been terminated) without any assurance at the time of retirement (or termination) of being rehired by the former employer, and receives from the former employer a payment based on long service (or for loss of employment or office), it is the Department's position that the payment will qualify as a retiring allowance even if the parties have an understanding that the individual might be rehired at a later time when circumstances have changed. Such a payment will not be considered a retiring allowance, however, where, between the date of the notice of retirement or of termination and the last day of employment, arrangements are made for the employee to be rehired.

Similarly, where the individual is engaged shortly after leaving his employment to perform services for his former employer or an affiliate as an independent contractor, a determination as to whether there has been a loss of employment or office or a retirement will depend on the nature of the contractual arrangement. Our comments in the previous paragraph apply equally in these circumstances.

Our comments reflect an expression of opinion only and are not binding on the Department, as explained in paragraph 21 of Information Circular 70-6R.

Yours truly,

for Director
Financial Industries Division
Rulings Directorate