7 May 1996 GST/HST Interpretation 1996-05-07 - Refund Cheque Policy for Joint Filers

This is in reply to your memorandum of January 10, 1996, and in response to XXXXX XXXXX E-Mail of April 22, 1996, regarding the refund cheque policy for joint filers. I apologize for the delay in replying.

You indicate that current departmental procedures regarding joint filers require system generated cheques to be issued for the disposal of remaining credits from an individual's Joint Filer's account once the requested offsets have been made and that when the coordinator of the group requests in writing that residual credits be combined in one cheque, a single manual cheque is prepared and issued to the coordinator. You further indicate that subsection 228(7) of the ETA and its regulations do not stipulate how credit amounts remaining after the offsets are made are to be handled, but that sections 229 and 230 of the ETA require a net tax refund or overpayment to be paid to the person filing a particular return.

You enquire whether the practice of issuing a single refund cheque to the coordinator for combined residual credits remaining after offsets are completed between several GST accounts is supported by the legislation.

The brief answer to your question is that the issuance of a single refund cheque to the coordinator for residual credit amounts is not supported by the ETA and is in fact prohibited by the Financial Administration Act (FAA).

Subsection 228(7) of the ETA allows a member of a group of closely corporations to reduce or offset the tax or net tax owed by that member by the amount of a refund or rebate to which another member of the group is entitled. The prescribed circumstances and conditions for making an offset under ss.228(7) are set out in the OFFSET OF TAXES BY A REFUND OR REBATE (GST) REGULATIONS.

Subsection 228(7) and its regulations only provide for the amount of a refund or rebate to be used to offset or reduce the tax payable or net tax remittable by a member as opposed to actually paying the refund or rebate to that member. As you correctly point out, ss. 228(7) and its regulations do not specify how the amount of a rebate or refund remaining after the offset or reduction is made is to be handled. This is because the residual amount of the refund or rebate remains payable to the member who was entitled to the refund or rebate under the applicable refund or rebate provision. For instance, if part of a net tax refund that is payable to Member A under section 229 of the ETA is used to completely offset net tax remittable by Member B, the residual amount of the refund would remain payable to Member A under section 229.

The practice of issuing a single cheque payable to the coordinator for residual GST refunds or rebates owed to other members is prohibited by section 67 of the FAA which provides that a Crown debt is not assignable except as provided in the FAA or another Act of Parliament. (There is no provision in the ETA nor the FAA that would allow for the assignment of members' GST refund or rebate amounts to the coordinator.) Consequently, when there are residual credit amounts, they must be paid individually to the respective members who are entitled to those amounts.

Although issuing a single cheque payable in the name of the coordinator for the residual credits is prohibited, the refund or rebate cheques payable to the members may nevertheless be mailed to the coordinator. This is provided the Department has obtained written authorization from the respective members that the coordinator is authorized to receive their cheques.

Should you require further information, please contact Patrick McKinnon at 952-8813.

Dave Caron
Manager
GST Administration and Enforcement Provisions
General Applications Division
GST Rulings and Interpretations Directorate

GAD#: 2673(GEN)