29 September 2003 GST/HST Interpretation 46816 - GST on the Transfer of a Vehicle in the Course of the Settlement of an Insurance Claim

Dear XXXXX:

Thank you for your letter sent by facsimile XXXXX concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the transfer of a vehicle in the course of the settlement of an insurance claim.

We are unable to issue a ruling where a matter on which a determination is requested is one of fact and all the pertinent facts cannot be determined. Based on the information provided, we are not in a position to issue a ruling on this matter. We are, however, pleased to provide a general explanation of how the Excise Tax Act would apply on the transfer of property of a person, to an insurer in the course of settling an insurance claim.

Background

XXXXX we understand the following:

A repair shop (the Shop) completed repairs on XXXXX (the vehicle). The motor of the vehicle seized XXXXX. You brought the vehicle back to the Shop. The Shop determined they were negligent on their repairs. The Shop's insurance company (the insurer) accepted liability and negotiated a settlement of $XXXXX with you. You have received payment of the $XXXXX from the insurer. As part of the claims settlement agreed to, the vehicle would be transferred to the insurer for salvage.

Interpretation Requested

You would like to know if the supply of a vehicle to an insurer in the course of the settlement of an insurance claim is a taxable supply, and whether GST is to be collected and remitted on the supply?

Interpretation Given

Most financial services are exempt from the GST/HST, including the payment of an amount in full or partial satisfaction of a claim arising under an insurance policy. Therefore, where an insurer makes a cash settlement as a result of a claim under an insurance policy the payment is not subject to the GST/HST.

Furthermore, a transfer of property of a person to an insurer in the course of settling an insurance claim is treated as having occurred for no consideration (i.e. the value of the transfer for GST/HST purposes is zero). Therefore, GST/HST does not apply to the supply of a vehicle from a person to an insurer in the course of the settlement of an insurance claim.

The foregoing comments represent our general views with respect to the subject matter of your letter. Proposed amendments to the Excise Tax Act, if enacted, could have an effect on the interpretation provided herein. These comments are not rulings and, in accordance with the guidelines set out in section 1.4 of Chapter 1 of the GST/HST Memoranda Series, do not bind the Canada Customs and Revenue Agency with respect to a particular situation.

For your convenience, find enclosed a copy of section 1.4 of Chapter 1 of the GST/HST Memoranda Series.

Should you have any further questions or require clarification on the above matter, please do not hesitate to contact me at (613)-954-7945.

Yours truly,

Susan Mills
Rulings Officer
Specialty Tax Unit
Financial Institutions and Real Property Division
Excise and GST/HST Rulings Directorate
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