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:
Tax treatment under paragraph 81(1)(h) of the Act of payments received for respite care.
Position TAKEN:
Generally taxable as business income.
Reasons:
The situations do not meet the requirement that the cared-for individual must live in the caregiver's principal place of residence; or the caregiver's principal place of residence must be maintained for use as the cared-for individual's residence during the period for which the payments are made.
XXXXXXXXXX 2001-010733
T. Young, CA
January 24, 2002
Dear XXXXXXXXXX:
Re: Paragraph 81(1)(h) of the Income Tax Act (the "Act") - Respite Care
This is in reply to your letter dated October 19, 2001, which was forwarded to us by Rick Owen, concerning the application of paragraph 81(1)(h) of the Act to respite care situations.
In your letter, you stated that it was your understanding that paragraph 81(1)(h) does not apply to amounts received to provide respite care because it does not meet the requirements of the paragraph. Out-of-home respite care (i.e., in the home of the caregiver) is not exempt because the home is not the principal residence of the cared-for individual. Depending on whether the caregiver is providing the care in the course of a business or employment, the income would be taxed as either business or employment income.
Where in-home respite care is provided (i.e., in the home of the cared-for individual), the income would, generally, be taxed as business income.
You noted that you have been contacted by service providers indicating they are receiving the following information:
? In-home respite situations are taxable unless the payer of the funds is the agency/service provider or funding is paid directly from the funding source (in this case, the Persons with Developmental Disabilities (PDD) Department with the provincial government).
? Out-of-home respite care is not taxable as it is the primary residence of the caregiver.
You have asked us to clarify the situation.
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 ruling request submitted in the manner set out in Information Circular 70-6R4, dated January 29, 2001. It would also be necessary to review all relevant documentation before a definitive determination of the tax implications could be made. Therefore, we can only provide you with the following general comments.
Under paragraph 81(1)(h), the cared-for individual must reside in the caregiver's principal place of residence, or the caregiver's principal place of residence must be maintained for use as the cared-for individual's residence during the period for which the payments are made. Because respite care is only provided for short periods of time, it is our view that neither requirement will ever be met, for both in-home and out-of-home respite care.
Income received for providing respite care may be either employment or business income and, accordingly, depends on the facts of each situation. For more information on employer-employee relationships, see the pamphlet called "Employee or Self-employed?" (RC4110), which can be found on our web site at
http://www.ccra-adrc.gc.ca /E/pub/tg/rc4110ed/rc4110ed-01.html.
If the caregiver is not providing the respite care as an employee, he or she may be carrying on a business. It is our general view that any undertaking or activity of a taxpayer that results in a profit or has a reasonable expectation of profit would be viewed as the carrying on of a business. On the other hand, where the activity or undertaking has no reasonable expectation of producing a profit, a business would not be considered to have been carried on and any losses that resulted would not be deductible for income tax purposes.
Caregivers may contact the Client Services Division of their local Tax Services Office to obtain assistance in determining the income tax treatment of specific payments.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 2 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2002
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2002
Email this Content