6 December 2000 GST/HST Interpretation 32362 - HST APPLICATION RULING Eligibility to Claim an Input Tax Credit for HST Paid on Collision Repairs on an Insured Leased Vehicle

Dear XXXXX:

Thank you for your facsimile of August 14, 2000, concerning the eligibility of XXXXX to claim an input tax credit (ITC) with regard to HST paid on collision repairs for a leased vehicle, related to an insurance claim.

Statement of Facts

On the basis of your facsimile of August 14, 2000, to the XXXXX Technical Interpretation Services Centre of the Canada Customs and Revenue Agency, which included excerpts from the lease agreement, the lessee's insurance and maintenance undertaking and the certificate of automobile insurance, and on the basis of our telephone discussion of September 21, 2000, the facts are understood to be as follows:

1. XXXXX, a registrant that is engaged in the business of financing and leasing vehicles and equipment, leased a vehicle to XXXXX (the lessees).

2. Under the lease agreement, the lessees are required to defend, indemnify and hold harmless the lessor and the officers and employees of the lessor from and against any damage, loss, theft or destruction of any vehicle, and against all losses, liabilities, damages, injuries, claims, demands, costs and expenses of every kind and nature, whether or not covered by insurance, including legal fees and disbursements, arising out of and in connection with the use, condition or operation of vehicles during the lease term.

3. Under an Insurance and Maintenance Undertaking pertaining to the vehicle lease (the Undertaking), the lessees agree to be responsible for all maintenance to the vehicle and all body damage to the vehicle beyond normal wear and tear, as well as mechanical defects beyond normal usage.

4. The Undertaking also specifies that the lessees are responsible for delivering to the lessor an insurance policy that insures every operator (driver) of the vehicle. The insurance policy must provide one million dollars in bodily injury and property damage coverage, and accident benefits as required by law, with specified deductible amounts. The insurance policy must be endorsed to protect the lessor, the lessees and any other person having an interest in the vehicle. The lessor must be named as an insured or as an additional insured and an additional loss payee on all policies.

5. The lessees obtained XXXXX to insure the vehicle, with the insured persons being named as XXXXX. The insurance policy contained the insurance coverage required by the terms of the Undertaking.

6. The lessees had an accident that required repairs. The lessees entered into an agreement with a business operating under the name of XXXXX to have the repairs made to the vehicle. XXXXX invoiced the lessees for consideration and HST for the repairs.

7. The lessees paid the consideration for the repairs and filed an insurance claim with respect to this amount. The lessees did not pay the HST that was invoiced to them for this supply.

8. XXXXX has requested that XXXXX pay the HST that was included in the invoice to the lessees.

Ruling Requested

You have requested a ruling as to whether, if XXXXX pays the HST on the automotive repairs that were acquired by the lessees from XXXXX, XXXXX can claim an ITC with respect to that tax.

Ruling Given

Based on the facts set out above, we rule that, whether or not XXXXX pays the HST on the automotive repairs that were acquired by the lessees from XXXXX, XXXXX is not eligible to claim an ITC with respect to that tax.

This ruling is subject to the general limitations and qualifications outlined in section 1.4 of Chapter 1 of the GST/HST Memoranda Series. We are bound by this ruling, provided that none of the above issues is currently under audit, objection, or appeal, that there are no relevant changes in the future to the Excise Tax Act (ETA) or to our interpretative policy, and that you have fully described all necessary facts and the transaction for which you requested a ruling.

Explanation

One of the conditions that must be met in order for a registrant to claim an ITC in respect of tax paid or payable on supplies is that the claimant must be the "recipient" of the supply in question. The definition of "recipient" in subsection 123(1) of the ETA states that, where consideration for the supply is payable under an agreement for the supply, the person who is liable under the agreement to pay that consideration is the recipient. Consequently, the only person who may be eligible to claim an ITC in respect of tax on the consideration for a supply is the person who is liable to pay that consideration.

Based on the information provided, XXXXX is not the recipient of the taxable supply of repairs provided by XXXXX. Therefore XXXXX is not eligible to claim an ITC in respect of the HST on that supply, even if XXXXX pays the HST to XXXXX.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at 613-952-9211.

Yours truly,

Don Dawson
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate