20 April 2021 Internal T.I. 2020-0843351I7 - Liquid meal replacement products

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: 1) Whether the cost of a particular liquid meal replacement product that is prescribed for a patient post lung and throat cancer, would be eligible as a medical expense for the purpose of the medical expense tax credit. 2) Whether consuming the particular liquid meal replacement product may be considered "therapy" for the purpose of the disability tax credit.

Position: 1) Question of fact, although unlikely in the present case; we are not aware of liquid meal replacement products that can lawfully be acquired for use by the patient only if prescribed by, or with the intervention of, a medical practitioner. 2) Likely not. Being required to consume a particular meal replacement product seems akin to a dietary regime or restriction.

Reasons: 1) The wording in paragraph 118.2(2)(n) of the Act and section 5701 of the Regulations. 2) The requirements in paragraph 118.3(1)(a.1) and subsection 118.3(1.1) of the Act.

								April 20, 2021

Jackie Baron							HEADQUARTERS
Legislation Section						Income Tax Rulings Directorate
Stakeholder Relations Division					Randa El-Kadi
Individual Returns Directorate
Assessment, Benefit, and Service Branch

								2020-084335

Liquid meal replacement products and the medical expense tax credit and disability tax credit

We are writing in response to your query regarding liquid meal replacement products. More specifically, you ask whether an individual who was prescribed a particular liquid meal replacement product (Isosource 1.5) may be able to claim the cost of this product as a medical expense for the purpose of the medical expense tax credit (METC). You also ask whether consuming the particular product may be considered “therapy” for the purpose of the disability tax credit (DTC). You explain that the individual requires this particular meal replacement following throat and lung cancer, and cannot access nutrients through any normative means.

Our comments

Medical expense tax credit

Medical expenses that are eligible for the METC are limited to those described in subsection 118.2(2) of the Income Tax Act (the Act). If a particular expenditure is not described as an eligible medical expense in subsection 118.2(2) of the Act, or if the conditions under which the expenditure would qualify are not met, the expenditure does not qualify for the METC, even though the expenditure may have been incurred for medical reasons.

Paragraph 118.2(2)(n) of the Act allows, as a medical expense, amounts paid for

(i) drugs, medicaments or other preparations or substances (hereinafter referred to as substances):

(A) that are manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function,

(B) that can lawfully be acquired for use by the patient only if prescribed by a medical practitioner or dentist, and

(C) the purchase of which is recorded by a pharmacist.

(ii) drugs, medicaments or other preparations or substances that are prescribed by regulation;

For the purpose of subparagraph 118.2(2)(n)(ii) of the Act, section 5701 of the Income Tax Regulations (the Regulations) provides that a drug, medicament or other preparation or substance is prescribed if it:

(a) is manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function;

(b) is prescribed for a patient by a medical practitioner; and

(c) may, in the jurisdiction in which it is acquired, be lawfully acquired for use by the patient only with the intervention of a medical practitioner.

Based on the information you have provided, it is likely that the liquid meal replacement product does not qualify as an eligible medical expense because it can be lawfully acquired without a prescription, and it does not require the intervention of a medical practitioner to be lawfully acquired. Even though the meal replacement product is taken for medical reasons, it is not possible to give approval for expenses to be claimed for the purposes of the METC if they do not meet the requirements of the law.

Therapy under the disability tax credit

For purposes of the DTC, therapy for an individual who has a severe and prolonged impairment in physical or mental functions is described in paragraph 118.3(1)(a.1) of the Act as therapy that:

(i) is essential to sustain a vital function of the individual;

(ii) is required to be administered at least three times each week for a total duration averaging not less than 14 hours a week; and

(iii) cannot reasonably be expected to be of significant benefit to persons who are not so impaired.

Subsection 118.3(1.1) of the Act provides rules to be used in determining whether therapy is required to be administered at least three times each week for a total duration averaging not less than an average of 14 hours a week. Specifically:

a) only time spent on activities requiring the individual to take time away from normal everyday activities in order to receive the therapy is to be considered;
b) where the therapy requires a regular dosage of medication that is required to be adjusted on a daily basis, the time spent on the therapy includes time spent on activities that are directly related to determining the dosage of the medication (subject to (d) below);

c) where the individual is a child who is unable to perform the activities related to the administration of the therapy as a result of the child’s age, the therapy time includes the time, if any, spent by the child’s primary caregivers performing or supervising those activities for the child; and

d) therapy time does not include time spent on activities related to dietary or exercise restrictions or regimes (even if those restrictions or regimes are a factor in determining the daily dosage of medication), travel time, medical appointments, shopping for medication or recuperation after therapy.

It is our view that being required to consume a particular meal replacement product would be more akin to a dietary restriction or regime and would not be considered therapy as contemplated by paragraph 118.3(1)(a.1) of the Act.

Individuals who rely on liquid meal replacement products may qualify for the DTC under the category of “feeding,” if a medical practitioner certifies in prescribed form that they have a severe and prolonged impairment in physical or mental functions, which causes them to be markedly restricted, for example, in their ability to feed themselves. This may be the case, for example, where an individual relies on tube feeding or takes an inordinate amount of time to feed them self due to such things as significant difficulties with swallowing, choking on food, etc, as the case may be.

We trust our comments will be of assistance.

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency’s electronic library. After a 90-day waiting period, a severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. You may request an extension of this 90-day period. The severing process removes all content that is not subject to disclosure, including information that could reveal the identity of the taxpayer. The taxpayer may ask for a version that has been severed using the Privacy Act criteria, which does not remove taxpayer identity. You can request this by e-mailing us at: ITRACCESSG@cra-arc.gc.ca. A copy will be sent to you for delivery to the taxpayer.

Lita Krantz, CPA, CA
Manager
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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