14 December 1988 Income Tax Severed Letter 5-6578 - [Taxable Benefits Associated with Training]

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.

A. Humenuk (613) 957-2135 DEC 14 1988

Dear Sirs:

Re: Taxable Benefits Associated with Training

We are responding to your letter of September 12, 1988, wherein you requested our views on the tax implications associated with training and counselling of employees. You are specifically concerned with re-employment training and counselling and job-related training.

As stated in the Department of Finance's Information Release dated June 30, 1988, (copy of which is attached) an amendment has been proposed whereby benefits derived from counselling services received upon retirement or termination of office or employment will not be considered as taxable benefits. The draft legislation sets out the time in which such services must be provided in order to be considered as a non-taxable benefit. Assuming that draft legislation is implemented into law as proposed, the distinction between in-house counselling and externally-engaged counselling noted in paragraph 26 of the attached Interpretation Bulletin IT-470R "Employees Fringe Benefits" will no longer apply to re-employment or retirement counselling if provided within the appropriate time frame.

We would, however, distinguish between counselling services and educational or training services. The benefit arising from assistance given by an employer with respect to the cost of retraining as opposed to counselling, is a taxable benefit under paragraph 6(1)(a) of the Income Tax Act (the "Act") because the retraining of an employee in the event of termination is not undertaken primarily for the benefit of the employer and is not exempt by virtue of the proposed legislation.

While in-house training which relates to the employer's business does not constitute a taxable benefit, a taxable benefit will normally arise when an employer reimburses an employee for tuition fees paid by the employee. Paragraph 19 of the bulletin referred to above sets out the conditions where the benefit would not be taxable.

We trust our comments will be of assistance to you.

Yours truly,

Original Signed By

P.D. Fuoco

for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch

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