17 November 2000 External T.I. 2000-0042265 - COUNSELLING TO EMPLOYEES

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Whether counselling for mental or physical health, re-employment, retirement, legal and financial are taxable employee benefits.

Position: All except the latter two are likely non-taxable.

Reasons: Subparagraph 6(1)(a)(iv).

XXXXXXXXXX 	J. Gibbons, CGA
		2000-004226
November 17, 2000

Dear XXXXXXXXXX:

We are replying to your letter dated August 10, 2000, concerning the income tax treatment of various counselling services provided by a Canadian corporation (the "consultant") to its corporate clients. You described the following situation:

• Pursuant to arrangements with various corporate clients (the "employers"), the consultant will undertake to provide, either directly or through outside professionals or agencies, counselling services to the employers' employees.
• Under the arrangements with the employers, the consultant will charge a fixed monthly fee to the employers for providing the counselling services, regardless of the actual use of such services by the eligible employees. The employees will pay nothing for the use of these counselling services.
• Alternatively, under a variation of such arrangements, a fixed fee will be payable by the employer as long as employee use does not exceed a specified percentage of eligible employees each year, and an additional fee will be payable by the employer if actual use exceeds the specified percentage.
• The types of services that are provided include counselling for mental or physical health, re-employment, and retirement.
• In addition to the above services, the consultant will also provide financial and legal counselling:

i Legal counselling services may include counselling in the following areas:

a. Real estate

b. Separation and divorce

c. Bankruptcy

d. Contracts

e. Motor vehicles

f. Wills and trusts

ii Financial counselling may include counselling in the following areas:

a. Credit/debt management

b. Savings plans

c. Insurance plans

d. Bankruptcy

It is your view that the counselling services counselling for mental or physical health, re-employment, and retirement do not give rise to a taxable benefit in the hands of employees by virtue of the exemption in subparagraph 6(1)(a)(iv) of the Income Tax Act (the "Act"). However, you wish to know whether legal and financial counselling services will be taxable benefits to employees. If yes, you wish to know how the benefits should be calculated and the employer's responsibility for reporting these benefits. In this regard, you indicated that, under the terms of the arrangements with the employers, the use of the services by the employees is kept strictly confidential from employers. Thus, employers will not be aware of a particular employee's use of the counselling services.

As requested, we have considered the situation outlined in your letter and have provided some comments below. However, we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Thus, our comments are of a general nature only.

Our views

Subparagraph 6(1)(a)(iv) of the Act exempts from employment income any benefit derived from counselling services for

• the mental or physical health of an employee or an individual related to the employee, other than a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies; or
• the re-employment or retirement of the employee.

According to paragraph 46 of Interpretation Bulletin IT-470R, "Employees' Fringe Benefits (Consolidated)," subparagraph 6(1)(a)(iv) applies to such services as tobacco, drug or alcohol counselling, stress management counselling, and job placement and retirement counselling. In our view, this provision does extend to legal and financial counselling services. Thus, any such services received by employees from their employers is taxable under paragraph 6(1)(a) of the Act.

Where an amount in respect of a taxable benefit must be included in an employee's income, the employer must determine its value or make a reasonable estimate of it and include that value in the box provided on form T4 Supplementary under the heading "Employment Income Before Deductions" and also in the appropriate box in the area entitled "Taxable Allowances and Benefits". (See paragraph 3 of IT-470R Consolidated.) This requirement is contained in subsection 200(1) of the Income Tax Regulations, which requires every person who makes a payment described in subsection 153(1) of the Act to make an information return in prescribed form in respect of such a payment. If you require assistance in determining the value of particular benefits provided to employees, please consult with officials in your local tax services office.

We trust that these comments will be of assistance.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate

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