12 March 2013 GST/HST Ruling 144339 - Supply of in–home services

Please note that the following document, although correct at the time of issue, may not represent the current position of the Canada Revenue Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence du revenu du Canada.

[Addressee]	Excise and GST/HST Rulings Directorate Place de Ville, Tower A, 15th floor 320 Queen Street Ottawa ON K1A 0L5
	Case Number: 144339
	March 12, 2013

Dear [Client]:

Subject:

GST/HST RULING Supply of in-home services

Thank you for your letters of May 3, 2012 and January 21, 2013, concerning the application of the Goods and Services Tax (GST)/Harmonized Sales Tax (HST) to the supply of services provided by […] (the Company). We apologize for the delay in our response.

The HST applies in the participating provinces at the following rates: 13% in Ontario, New Brunswick and Newfoundland and Labrador, 15% in Nova Scotia, and 12% in British Columbia. The GST applies in the rest of Canada at the rate of 5%.

Effective April 1, 2013, the 12% HST in British Columbia will be replaced by the 5% GST and a provincial sales tax. It is also proposed that, effective April 1, 2013, the provincial sales tax and the 5% GST currently in effect in Prince Edward Island will be replaced by a 14% HST.

All legislative references are to the Excise Tax Act (ETA) unless otherwise specified.

Statement of Facts

Based on your telephone conversations with […], and the documents you provided, we understand the facts as follows:

1. […][Individual X], was diagnosed with […][a terminal illness]. On [mm/dd/yyyy], [individual X] signed an agreement with the Company for the supply of in-home services. At that time, [individual X] required the assistance of the Company on a part-time basis, approximately [#] hours per week, as you were able to care for [individual X] until [individual X]'s […] surgery on [mm/dd/yyyy]. From May – September 2011, you required the services of the Company for [#] – [#] hours per week. From [mm/dd/yyyy] [individual X] required services on a 24-hour per day basis.

2. According to the Company's website […], the Company provides the following services: in-home services, emergency care, […], nursing care, […].

3. You provided a copy of the […] (the Agreement) between the Company and [individual X]. Pursuant to the Agreement, the following services would be provided: bathing, dressing, grooming, incontinence care, mobility, medication reminders, meal preparation, transportation, light housekeeping, laundry, errands, and companionship.

[…][additional services provided]

The services were provided by several different caregivers and personal support workers who attended to [individual X] on a shift basis, one worker per shift.

In order for services to begin, [individual X] was required to pay a […][deposit] that represented an estimate of the fees for the first […] weeks of service, in the amount of $[…]. The billing rate is […].

4. During that same period of time, [individual X] was also receiving in-home services paid for by […][the Province], […]. These services included: physiotherapy, nutritional counselling, occupational therapy, and social work. [Individual X] also benefited from supplies and equipment rentals, e.g. an electric patient lift, commode and electric hospital bed. [Individual X] was also under home palliative care, receiving regular visits from Hospice doctors and nurses.

You enclosed a letter from […] at […] [the Province] dated [mm/dd/yyyy], indicating [individual X] was also entitled to [#] hours of government-funded "home support" per month through [the Province] effective [mm/dd/yyyy]. […].

You decided to use the government-funded services to decrease the private service provided by the Company for the period [mm/dd/yyyy - mm/dd/yyyy]. The services were provided by […][the caregivers]. The supplemented care allowed you to reduce the 24 hour per day care provided by the Company.

On [mm/dd/yyyy], you felt it was necessary to terminate the government-funded services provided by [the caregivers]. However, [individual X] remained entitled to receive [#] hours per month of government-funded personal support services until the time of [individual X] passing on [mm/dd/yyyy].

5. You also provided two sets of invoices from the Company. The first set is for the part-time services provided by the Company for the period of [mm/dd/yyyy] to [mm/dd/yyyy], the day [individual X] was approved by [the Province] to receive government-funded services. The second set of invoices is for the period of [mm/dd/yyyy] and [mm/dd/yyyy]. These invoices are for the supply of 24-hour per day care.

The invoices contain the name of the care provider, the number of hours they worked and their hourly rate. The invoices indicate that [individual X] received "In-home Care" but with the exception of nursing care, do not indicate in what professional capacity the caregivers were providing services.

6. In your [mm/dd/yyyy] and [mm/dd/yyyy] letters, you enclosed a copy of GST/HST Interpretation Case Number [#], dated [mm/dd/yyyy] (the Interpretation) in which you referred to in your ruling request.

Ruling Requested

You would like to know if the supply of services supplied by the Company were exempt from GST/HST pursuant to section 13 of Part II of Schedule V.

Ruling Given

Based on the facts set out above, we rule that the supply of services supplied by the Company is not exempt from GST/HST pursuant to section 13 of Part II of Schedule V. As there is no other exemption applicable in these circumstances, the services supplied by the Company were subject to HST at a rate of 13%.

This ruling is subject to the qualifications in GST/HST Memorandum 1.4, Excise and GST/HST Rulings and Interpretations Service. We are bound by this ruling provided that none of the above issues are currently under audit, objection, or appeal, that no future changes to the ETA, regulations or our interpretative policy affect its validity, and all relevant facts and transactions have been fully disclosed.

Explanation

Every recipient of a taxable supply made in Canada is required to pay GST/HST at the rate of 5%, 12%, 13% or 15% (depending on the place of supply) on the value of the consideration for a supply unless it is an exempt supply. Exempt supplies are listed in Schedule V. Part II of Schedule V lists certain health care services that are exempt from GST/HST. For a supply of a service to be exempt from GST/HST under Part II of Schedule V, a specific exempting provision included in Part II must apply to that supply. Section 13 of Part II of Schedule V is the relevant section in these circumstances.

Homemaker service

Section 13 of Part II of Schedule V exempts a supply of "homemaker services" where the services are rendered to an individual in the individual's place of residence, whether the recipient (Footnote 1) of the supply is the individual or any other person, and one of the following conditions apply:

1 Subsection 123(1) defines a "recipient" of a supply to mean the person who is liable to pay the consideration for the supply, where consideration for the supply is payable under an agreement for the supply.

(a) the supplier is a government or municipality;

(b) a government, municipality, or organization administering a government or municipal program in respect of homemaker services pays an amount to the supplier in respect of the supply, or to any person for the purpose of the acquisition of the service; or

(c) another supply of a homemaker service rendered to the individual is made in the circumstances described in paragraph (a) or (b).

Section 1 of Part II of Schedule V defines a "homemaker service" to mean a household or personal service, such as cleaning, laundering, meal preparation and child care, that is rendered to an individual who, due to age, infirmity or disability, requires assistance.

You requested a ruling to determine whether the services purchased by [individual X] from the Company for the period [of] September […] 2011 to January […] 2012 were exempt from GST/HST. Based on the facts provided, your question pertains to paragraph 13(c) of Part II of Schedule V.

Paragraph 13(c) of Part II of Schedule V exempts a supply of an unsubsidized or private homemaker service rendered to an individual where a supply of government-funded homemaker services is also made and is made in the circumstances outlined in paragraph (a) or (b). If [the Province] is an organization administering a government program in respect of home maker services, paragraph 13(b) of Part II of Schedule V would be applicable.

It is your view that as [individual X] was approved, and therefore entitled, to receive [#] hours of "personal support" services from [the Province] effective [mm/dd/yyyy], the private services [individual X] purchased from the Company should be exempt even though [individual X] did not use the government-funded services, other than for the period [mm/dd - dd/yyyy]. Your view is based on the text you highlighted and underlined from the Interpretation. The entire paragraph has been reproduced:

"The exemption under section 13 of Part II of Schedule V also applies to additional unsubsidized homemaker services when the service is rendered to an individual in the individual's place of residence, who is receiving other exempt homemaker services (i.e., the individual is also receiving subsidized homemaker services from a government, a municipality or an organization administering a government or municipal program in respect of homemaker services. Both the subsidized and unsubsidized homemaker services do not have to be made by the same supplier. However, in order for the exemption to apply, the supplier must maintain evidence of the individual's entitlement to subsidization from a government, a municipality or an organization administering a government or municipal program in respect of homemaker services."

The wording in paragraph 13(b) of Part II of Schedule V describes a circumstance where a government, municipality or organization administering a government or municipal homemaker services program pays an amount to either (a) a third-party as payment for providing the homemaker services; or (b) to an individual as a subsidy to acquire homemaker services. The use of the words "pays an amount" in paragraph 13(b) means that the supply of government-funded homemaker services must actually be made, as an amount would generally not be paid unless services were rendered. Therefore, for a supply of private homemaker services to be exempt under section 13 of Part II of Schedule V, the supply must be made to an individual in their place of residence who is concurrently receiving government-funded services for which a payment is being made.

It is our view that paragraph 13(b) cannot be extended to include circumstances where an individual is entitled to homemaker services but does not use them because this would frustrate the requirement in paragraph 13(b) for a government, municipality or organization administering a government or municipal homemaker services program to "pay an amount" in respect of those services.

With regards to the text you quoted from the GST/HST Interpretation, the use of the term "entitlement" pertains to the supplier's obligation under the ETA to maintain evidence to support not charging GST/HST on his or her supply. When the paragraph is read as a whole, the use of the term "entitlement" does not suggest that the exemption for the additional supply of homemaker services is available based on entitlement to, or approval for, government-funded services. The paragraph clearly states that an individual must also be receiving homemaker services from a government, or an organization administering a government program in respect of homemaker services for the exemption to apply to private services. This interpretation is consistent with Parliament's intention to exempt an additional private homemaker service an individual acquires where government-funded homemaker services are insufficient to cover the needs of the individual.

To summarize, as the private homemaker services supplied by the Company were not rendered to [individual X] while [individual X] was receiving government-funded homemaker services the conditions in section 13 of Part II of Schedule V have not been met. Therefore, the services purchased by [individual X] from the Company would not be exempt from GST/HST.

ADDITIONAL COMMENTS

Although we have determined that the exemption in section 13 of Part II of Schedule V did not apply to exempt the services [individual X] purchased from the Company, we have provided a response to your questions concerning the services supplied by the Company.

[…]

According to your [mm/dd/yyyy] letter, the primary services [individual X] received from the Company were personal hygiene activities and meal preparation. It is your view that these services should have been exempt from HST as homemaker services. Your view is based on the meaning of "homemaker services" provided in the Interpretation. The relevant except is as follows:

The meaning of "homemaker service" for purpose of the ETA is limited to the services that ordinarily fall within the class of household and personal services such as assistance with cleaning, meal preparation, laundry, child care, personal hygiene activities, and routine activities of daily living. CRA notes that the object of the ETA is to exempt publicly funded household and personal services rendered to individuals in their homes where these services are rendered to individuals who require such assistance due to age, infirmity or disability.

Despite the information you have provided, we are unable to rule whether the services purchased by [individual X] from the Company were a single supply of a homemaker service or personal care service or whether multiple supplies were made. Our general view regarding circumstances where an individual requires overnight supervision or 24-hour care is that these services do not fall within the definition of a homemaker service for purposes of the exemption in section 13 of Part II of Schedule V.

Section 1 of Part II of Schedule V defines a "homemaker service" to:

mean a household or personal service, such as cleaning, laundering, meal preparation and child care, that is provided to an individual who, due to age, infirmity or disability, requires assistance.

[Emphasis added]

The ETA does not define "household service" or "personal service". Where the ETA does not define a term, we refer to its ordinary and everyday meaning. In addition, as the definition of "homemaker service" in the ETA uses the term "such as" when referring to a household service" or a "personal service", the rules of statutory interpretation deem it necessary to consider the examples enumerated in the definition of a "homemaker service" to establish the context in which these terms are defined.

It is our view that the definition of a homemaker service in the ETA includes household and personal services of an ordinary household nature commonly referred to as housekeeping duties. The purpose of these services is to assist an individual with the tasks that are necessary to maintain his or her home because they have demonstrated a need for help with such tasks due to age, infirmity or disability. A homemaker service generally does not include personal hygiene activities or activities of daily living such as bathing, grooming, dressing (which are referred to as a personal support service) unless they form part of a supply of a homemaker service.

Therefore, a household service would include activities such as cleaning, laundering, ironing, menu planning, meal preparation, dishes, and garbage collection. A personal service is a service performed for or on behalf of an individual and includes activities such as child care, paying bills, shopping, collecting and posting mail, transportation to appointments, and preparing written communications. A personal service does not include activities relating to personal support or personal care which are generally performed on a person or require hands-on assistance.

With regards to the excerpt from the Interpretation, a supply of homemaker services may include personal hygiene activities depending on the nature of the supply being made. Services rendered to an individual such as personal hygiene activities and assistance with activities of daily living on their own generally do not qualify for the exemption as they do not meet the definition of a "homemaker service" in the ETA. However, if the personal hygiene activities and assistance with activities of daily living were incidental to, or formed part of, a supply of a homemaker service and were provided together for a single consideration, it is CRA's view that the personal hygiene activities would be considered a homemaker service. In these circumstances, the personal hygiene activities and assistance with activities of daily living would not be the predominant or primary activities performed.

The service supplied by the Company encompasses more than one distinct activity. We understand that some of the daily activities performed by the Company are enumerated in the definition of homemaker service (i.e., laundry, cleaning and meal preparation). However, for GST/HST purposes, where a person is receiving a combination of services and/or property, it is necessary to determine what is actually being supplied in order to apply the correct tax status. Therefore, in characterizing the overall service supplied by the Company, a distinction must be made between the individual daily activities performed by the Company and the overall service supplied. For the exemption in section 13 of Part II of Schedule V to apply, the overall supply must be one of a homemaker service.

You indicated that meal preparation and personal hygiene activities "were very much primary, essential services" [individual X] received from the Company. As indicated above, personal hygiene activities are not considered a homemaker service unless they are incidental to, or formed part of, a supply of a homemaker service. Although the Company supplied elements of a homemaker service (i.e., meal preparation, laundry, cleaning), the extent of [individual X]'s medical issues were such that [individual X] required continuous care and supervision. Therefore, it is our view that the overall characterization of the service [individual X] likely intended to purchase was one of personal care and supervision and not one of housekeeping duties associate with running a household.

We understand your concern that homemaker services such as laundry, housecleaning, and meal preparation may be exempt under the ETA but there is no exemption for the personal care of individuals in their home who require assistance with personal hygiene and routine activities of daily living. The authority of the CRA is limited to the administration of the ETA and its Regulations, as passed by Parliament. An amendment to the ETA would be required to treat the supply of "personal support services" as exempt. Legislative amendments are a matter of tax policy, which falls within the responsibility of the Department of Finance. We have advised officials of that Department of your concern regarding the tax status of these services.

If you require clarification with respect to any of the issues discussed in this letter, please call me directly at 613-954-7952. Should you have additional questions on the interpretation and application of GST/HST, please contact a GST/HST Rulings officer at 1-800-959-8287.

Yours truly,

Alison Jones
Health Care Services Unit
Public Service Bodies and Governments Division