31 August 2001 External T.I. 2001-0092805 - TAX. BENEFITS-EMP. PROVIDED MED. EXAM.

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:

Does a medical examination provided by an employer's physician give rise to a taxable benefit where:

(a) It is provided only to executives over the age of 40 at the discretion of the employee.

(b) It is provided to new employees as a condition of their employment.

Position:

(a) Yes.

(b) No.

Reasons:

(a) The employee is the primary beneficiary of the expense incurred by the employer.

(b) The employer is the primary beneficiary.

XXXXXXXXXX 	2001-009280
		Randy Hewlett, B. Comm.
August 31, 2001

Dear XXXXXXXXXX:

Re: Taxable Benefits - Employer Provided Medical Examinations

We are writing in response to your letter dated July 16, 2001, wherein you requested our opinion on whether a taxable benefit has been conferred on an employee when the employer offers annual medical examinations performed by the company physician to executives over the age of 40, at the employee's discretion. You indicate that the examination is more thorough than those performed by general practitioners and covered by the Ontario Health Insurance Plan. As well, you inquire if a benefit would result when the examination is performed as a condition of new employment.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R4, Advanced Income Tax Rulings, dated January 29, 2001. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments.

Subparagraph 6(1)(a) of the Income Tax Act (the Act) requires an employee to include in income the value of any benefit received or enjoyed because of his or her employment. Whether or not a taxable benefit is conferred on an employee from an expense incurred by the employer depends upon whether it was incurred primarily for the benefit of the employee or the employer. In the absence of evidence to the contrary, the payment of a personal expense of an employee benefits the employee first and foremost.

Where it is established that the medical examination was necessary to fulfil a condition of employment, it is our view that the employer is the primary beneficiary of any expense incurred. However, where the medical examination is made available only to a select group of employees, unless the employer requires the examination as a condition of employment, the employee is considered the primary beneficiary of any expense incurred by the employer. In a case where the employee can exercise discretion as to whether to take an annual examination by the employer's physician, clearly it is not a condition of employment. As well, unless a medical exam with negative results impacts employment status in some manner, it cannot be said that the medical exam was a condition of employment. Accordingly, the employee must include in income the value of the benefit pursuant to paragraph 6(1)(a) of the Act.

By virtue of paragraph 118.2(3)(a) of the Act, any amount included in the employee's income that would normally qualify as an expense under subsection 118.2(2) of the Act for the medical tax credit, will be deemed to be an amount paid for the purposes of that provision as if it were paid directly by the employee. Therefore, the value of the benefit included in income that is related to the medical examination would likely qualify under paragraph 118.2(2)(a) of the Act as an amount paid to a medical practitioner in respect of medical services.

We trust our comments will be of assistance to you.

Yours truly,

Terry Young, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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