Principal Issues: Whether changes to the delivery of the Veterans Independence Program will affect the tax treatment of amounts received by eligible clients.
Position: No. The change from a contribution to a grant arrangement will not result in the taxation of payments in the hands of eligible clients.
Reasons: Pension payments, allowances or compensation that are received under or are subject to the Pension Act, are specifically excluded from income under paragraph 81(1)(d) of the ITA. These grants/prepayments are allowances which are subject to the Pension Act.
July 5, 2013
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your correspondence of May 8, 2013, about the taxation of amounts you receive for housekeeping and grounds maintenance under the Veterans Independence Program (VIP).
Because of recent changes to the VIP, you will now receive lump sums to pay your vendor invoices instead of sending the invoices for payment to Veterans Affairs Canada like you did before. You ask if this change means the lump sums are taxable and if you must report them as income on your income tax and benefit return.
The Canada Revenue Agency reviewed this change and determined that the lump sums are non-taxable because they are allowances specifically exempt under the Income Tax Act. Therefore, you do not have to report these amounts as income on your tax return.
I trust the information I have provided is helpful.
Yours sincerely,
Gail Shea, P.C., M.P.
Minister of National Revenue
Cynthia Underhill
905-721-5197
File # 2013-048956
