Great-West Life – Tax Court indicates that ancillary taxable services described in the “financial service” definition generally will be ignored

A third party (Emergis) provided automated claims processing services to Great-West Life, which administered or insured various client drug plans, so that the prescription drug claim of an employee would be processed at the pharmacy counter upon presenting her magnetic card.

Owen J ultimately found that the charges of Emergis to Great-West for this service were taxable under the Financial Services and Financial Institutions (GST/HST) Regulations, as they were "quintessentially administrative in nature." More interestingly, he found that in the absence of this Regulation, the service would have been exempt as being for the payment of insurance policy claims – notwithstanding that the Emergis service entailed the provision of taxable supplies described in para. (r.4) of the financial services definition, e.g., collecting, collating or providing information. He stated that "those services do not represent the essential character or substance of the supply, which is paying drug benefits to plan members."

This "essential character" approach means that (r.4), which refers to services which merely are preparatory or provided in conjunction with something else, will usually not apply, as these components of what usually is a single supply generally will not give the supply its "essential character," i.e., what the recipient is really paying for.

Neal Armstrong. Summaries of Great-West Life Assurance Company v. The Queen, 2015 TCC 225, under Financial Services and Financial Institutions (GST/HST) Regulations, s. 4(2) and s. 123(1) – financial service – (f.1), (r.4) and (r.5).