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.
SURREY TAXATION CENTRE Personal and General Taxpayer Services Section
Attention: Pat Betts
Payments to Caregivers in British Columbia
We are replying to your memorandum of April 15, 1993 concerning the taxation of payments made to independent contractors caring for developmentally handicapped adults in British Columbia. We apologize for the delay in our response.
The enquiry comes from XXXXXXXXXX
His question is whether or not the amounts received by them from the province under the Contract are taxable.
We contacted the Department of Community and Family Health Division of the Ministry of Health in British Columbia (the Ministry) and obtained the following additional information. The amount payable to the caregivers is paid under the Services to the Handicap Program in conjunction with Guaranteed Available Income for Need Act and Regulations of British Columbia (GAIN). A fee is negotiated with the caregiver for room, board and care. While the amount will vary depending on the extent of care required by the cared-for adult, the amount payable to an independent contractor is about 85% of that which is paid to an agency which hires unionized employees to provide the care. The Ministry prepares a budget of the expected needs of the cared-for adult, including the negotiated fees for the caregiver, respite fees and any miscellaneous expenses. From that amount, the Ministry subtracts any income receivable directly by the cared-for adult. We understand that the cared-for adult typically has no source of income other than the amount payable under the GAIN program. The Ministry's contribution is then paid to the caregiver in 12 equal monthly instalments with any minor balance payable in a lump sum in the next year's contract. It is reasonable to assume that the $XXXXXXXXXX retroactive payment specified in the Contract is the balance owing in respect of the previous year's contract.
Since the program is designed to ensure that the cared-for adults live in a family setting we assume that the residence of the cared-for adults, XXXXXXXXXX is the principal place of residence of the caregiver and his wife and that it is maintained as the cared-for adult's residence during any period of absence such as the period of respite care.
It is a question of fact as to whether the caregiver is an employee or an independent contractor. You may wish to consult with the Source Deductions Division in the district office in order to determine the caregiver's status for the purpose of the Canada Pension Plan and Unemployment Insurance Act. However, article 9 of the Contract state that the caregiver is an independent contractor and we offer the following comments on the assumption that they are in fact independent contractors and not employees of the Ministry.
Paragraph 81(1)(h) of the Act exempts from income certain social assistance payments received by an individual to the extent that such payments are received directly or indirectly by that individual for the benefit of another person (other than a spouse or a person related to the individual). In order to be exempt, the social assistance payments must be ordinarily made on the basis of a means, needs or income test under a program provided for by an Act of Parliament or the laws of a province and not of a prescribed kind (at present, there are no prescribed social assistance payments for this purpose).
Based on our understanding of the facts as stated above, it would appear that the amount payable by the Ministry in respect of each cared-for adult is a social assistance payment paid on a needs basis. Accordingly, provided that the other conditions set out in paragraph 81(1)(h) of the Act are met, the amount received by the caregivers would be excluded from income by reason of paragraph 81(1)(h) even though the amount received includes an amount for services to be rendered by the caregiver. This position is consistent with our understanding of the intent of this provision.
Please note however, that any salaries or employment-related benefits received by an employee hired by the private contractor under a contract of employment, such as the that paid to a "respite caregiver", are not tax exempt. As stated in the all District Office memorandum from Client Assistance Directorate dated April 13, 1993, these amounts are not considered to be received "for the benefit of the cared-for individual" but rather as salary or wages. Accordingly, these payments are subject to tax under subsection 5(1) of the Act as income from an office or employment.
The taxation of the $XXXXXXXXXX payment for the purchase of the van depends, in part, upon the ownership of the van. We note that article 6 of the Contract requires that any equipment acquired with funds provided by the province be returned to the province in the event that this Contract or any future contract is terminated. This seems to suggest that beneficial ownership of the van may rest with the province (or alternatively, the cared-for adult) and thus the payment would not be included in the caregivers' income. If the ownership of the van rests with the caregivers, the $XXXXXXXXXX would be included in income under paragraph 12(1)(x) of the Act unless the caregivers elect to reduce the capital cost of the van under subsection 13(7.4) of the Act. It seems reasonable to assume that they would do so since they will presumably not be entitled to deduct CCA in respect of the vehicle (because paragraph 18(1)(c) of the Act prohibits any deduction in respect of an outlay or expense used to earn exempt income or in connection with property that is used to earn exempt income) and they will not realize any proceeds on the disposition thereof if and when the Ministry recovers the property without compensation upon the termination of the contracts.
As a final note, it would appear from the needs analyses of the cared- for adults that the cared-for adults may be required to pay a certain amount to the caregivers for their care. If this is so, these amounts will also be excluded from income on the basis that the caregiver indirectly receives the amount for the benefit of the cared-for adult and the other conditions in paragraph 81(1)(h) of the Act are also met.
P.D. Fuoco Section Chief Personal and General SectionBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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