16 April 2009 External T.I. 2009-0308691E5 - Payments to a sports coach

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.

Principal Issues: Is an amount paid to a coach by an NPO taxable?

Position: General comments only but likely taxable.

Reasons: Limited facts available.

XXXXXXXXXX 							2009-030869
								Michael Cooke, CA
April 16, 2009

Dear XXXXXXXXXX :

Re: Amounts Paid to Coaches

This is in response to your correspondence of February 3, 2009, wherein you inquired about the taxability of amounts paid by a not-for-profit sports club for the services of a "professional coach". We also understand that in your view, the amount paid might be described as an "honorarium".

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 70-6R5, Advanced Income Tax Rulings. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on our website at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.

Other than subsection 81(4) of the Income Tax Act (the "Act"), which provides an income tax exemption for the first $1,000 of income received by an individual from a government, municipality or other public authority for duties performed as a "volunteer" in certain emergency situations, there is no provision in the Act that specifically provides an income tax exemption for amounts received for services rendered by an individual in the circumstances described in your letter.

Generally, an amount paid to an individual as consideration for services rendered will be taxable either as income from an office or employment or as income from a business depending on the particular circumstances. An individual will normally be considered to have income from a business if the individual has a business relationship with a payer and has the right to determine where, when, and how the work is done. For more information on this topic please refer to the guide entitled Employee or Self-Employed? (RC4110).

It is acknowledged that the parties may describe the amount paid as an "honorarium". The term "honorarium" is not defined the Act, but it usually means a payment for a service. Accordingly, it would normally not be appropriate to characterize such a payment as a non-taxable gift. As noted above, and unless the amount of an honorarium is truly nominal, it will generally be taxable either as employment or business income. However, where the only amount paid is a reimbursement to a volunteer for reasonable out of pocket expenses incurred while volunteering, such amount would not likely be taxable.

Where the amounts paid are considered to be income from an office or employment the employer would be required to withhold the appropriate amounts and report such amounts on a T4 slip. Where the amounts are considered to be income from a business such amounts should ordinarily be reported by the payer on a T4A slip. You can obtain more information on these reporting requirements in the following guides: Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary Form (RC4157); and Employers' Guide - Filing the T4 Slip and Summary (RC4120).

We trust that these comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy & Regulatory Affairs Branch