21 February 1997 External T.I. 9641075 - 248(1)

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:

Whether benefits received from an employee-pay-all long term disability plan will become taxable if the employer pays the retail sales tax on the premiums.

Position:

No. Benefits will remain non-taxable.

Reasons:

In an employee-pay-all plan, the employees would be responsible for the payment of any sales tax on the premiums. If such amounts are paid by the employer, the amount then becomes a taxable benefit to the employees.

	                               	964107
XXXXXXXXXX	                              Jacques E. Grisé
(613) 957-2059

Attention: XXXXXXXXXX

February 20, 1997

Dear Sirs:

Re: Long Term Disability Plan

This is in reply to your letter of December 11, 1996 requesting a technical interpretation with respect to the application of paragraph 6(1)(f) of the Income Tax Act (the Act) to benefits received by employees under a Long Term Disability plan in which the employee pays the full amount of the contributions to the plan (an "employee-pay-all" plan) but the employer pays the retail sales tax on premiums. You are unclear as to whether it is a requirement in paragraph 6(1)(f) that the arrangement between the employee and the employer obligate the employee to pay the retail sales tax under an employee-pay-all plan.

In a situation where the employees have to make the full amount of the contributions to a Long Term Disability plan, it follows that they would be responsible for any sales tax stemming from the payment of the plan's premiums. Accordingly, the payment of such sales tax by the employer would result in a taxable benefit to the employees. However, the amounts received by an employee from such a plan would not be included in the employee's income by virtue of paragraph 6(1)(f) of the Act, since the employer would make no contributions to the plan.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch