File 11585-1
Ref. s. 182
Doc. HQR0056
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XXXXX
XXXXX
XXXXX
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October 23, 1998
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Dear XXXXX
This concerns your earlier letter to XXXXX, with regard to damage claims involving damage to the guard rail of a provincially owned bridge. We apologize for the delay in replying.
Facts
1. On January 13, 1991, an individual named XXXXX caused damage to the guard rail of a bridge with his car during the course of a highway accident.
2. The bridge was the property of XXXXX completed repairs on the bridge by January 29, 1991.
3. On November 4, 1991, XXXXX the individual's insurance company, for the cost of repairing the structure. The total amount of the bill was XXXXX plus XXXXX GST.
4. In a letter dated June 30, 1992, XXXXX took issue with the GST portion of the bill, on the grounds that GST should not apply to payments made in respect of a damage claim.
Interpretation Requested
You requested clarification as to whether XXXXX should collect and remit GST in respect of the damage payment received from the individual.
Interpretation Provided
The damage payment is not subject to GST, since no supply was received in exchange for the damage payment.
Rationale
The insurance company provided a tax exempt supply of a financial service to the individual, by paying the damage settlement payment to XXXXX on behalf of the individual. The insurance company did so because of the insurance contract that previously existed between the individual and the insurance company. However, neither the insurance company nor the individual received any supply from XXXXX as a result of the damage settlement payment.
Policy Statement 218, issued in draft form on May 25, 1998, states that a damage payment that is not a payment for a property or a service is not consideration for a supply, even if the person receiving the payment agrees to release from further liability the person making the payment.
The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed or future amendments to the legislation may result in changes to our interpretation. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST Memoranda Series, do not bind the Department with respect to a particular situation.
If you require any further information concerning this matter, please contact the undersigned at (613) 952-9211.
P. Bertrand
Manager
Financial Institutions and
Real Property
GST/HST Policy & Legislation
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