10 February 1995 Internal T.I. 9427206 - U.I. PREMIUM TAX CREDIT

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:

Whether a prescribed form filed with the Minister under subsection 126.1(6) of the Act is subject to the assessment and reassessment rules and appeal rights under Divisions I and J of the Act.

Position TAKEN:

No but a determination made under subsection 152(3.5) would be.

Reasons FOR POSITION TAKEN:

The prescribed form is neither a return of income subject to assessment for the purposes of section 152 nor does it constitute a request for determination as described in subsection 152(3.4). A determination made under 152(3.5) would however, be subject to assessment rules and appeal rights in accordance with subsection 152(1.2).

			February 10, 1995

	Source Deductions Division	Head Office
A. Bissonnette	Rulings Directorate
	Director	J.A. Szeszycki
(613) 957-8953
		942720

U. I. Premium Tax Credit

This is in reply to your memorandum of October 20, 1994 in which you requested our views on the time limits imposed on the taxpayer for filing or revising an application for the U.I. premium tax credit. In your memorandum you made a number of statements representing your understanding of the application of various provisions of sections 164 and 152 of the Act, as they relate to the claim for the credit, and have asked us to confirm that understanding.

The U.I. premium tax credit is created under the authority of subsection 126.1(6) of the Act (or subsection (7) where a partnership is involved) and, in order to bring it into existence, requires the employer to file with the Minister a prescribed form containing prescribed information. The credit amount, as determined under subsection 126.1(8), is deemed an overpayment of the employer's liability under Part I of the Act. The refund of that overpayment, as you noted, is authorized under subsection 164(1.6) of the Act. Each of these provisions was enacted concurrently, in 1994, applicable after 1992. The application of these provisions is limited to circumstances occurring in a taxation year beginning in 1993 and does not extend to subsequent taxation years.

You indicated in statement (2) of your memorandum that, in applying subsection 164(1) of the Act to these circumstances, the form described in subsection 126.1(6) is the "return of the taxpayer's income" that is required under that provision to be filed within 3 years of the end of the year. It is our view that the return of income referred to in subsection 164(1) is the return required to be filed in accordance with section 150 of the Act. The opening words of subsection 164(1) requires generally that, in order for an overpayment (as defined in subsection 164(7) of the Act) to be refunded, the taxpayer's return of income (as required by section 150) must be filed within 3 years of the end of the year. With respect to the U.I. premium tax credit, subsection 164(1.6) of the Act provides that, regardless of the specific requirements of subsection 164(1), including the requirement to file a return of income within 3 years of the end of the year, where the overpayment is one that is deemed to have arisen by virtue of the application of subsection 126.1(6) or (7), that is, the employer taxpayer has filed the related prescribed form containing prescribed information, the Minister shall refund that deemed overpayment without any further written application for it required by the taxpayer.

The words of the provision do not impose a requirement for the prescribed form to be filed with the return of income for the 1993 taxation year or with the T4 information return for the 1993 year which is due by March 1, 1994. Rather, it implies that filing the form later than March 1, 1994 is acceptable by stating that the "tax credit shall be deemed to have arisen on the later of March 1, 1994 and the day on which the form is so filed.".

It is our conclusion therefore that the prescribed form referred to in subsection 126.1(6) or (7) may be filed with the Minister at any time and, once filed, the overpayment deemed to have arisen as a result will be refunded without further application for it by the taxpayer.

The normal assessment and reassessment provisions of section 152 of the Act and, as a consequence, the rights of appeal contained in section 165 do not apply to the prescribed form filed under subsection 126.1(6) or (7). Subsection 152(1) describes the Minister's obligation to make assessments and determinations including, under paragraph (b), determination of amounts of tax deemed by various specified provisions of the Act to be paid on account of the taxpayer's tax under Part I or deemed by subsection 119(2) to be an overpayment. However, there is no mention of determinations of deemed overpayments of tax provided for in subsection 126.1(6) nor (7) of the Act. Subsection 152(1.2) provides that Divisions I and J of the Act, as they apply to assessments and reassessments, apply (with modifications) to determinations and redeterminations of amounts, including amounts determined or redetermined under section 126.1. Since we have concluded that the prescribed form is not subject to assessment or reassessment under section 152 of the Act, then the remaining question is whether the prescribed form constitutes a request for a determination which would be subject to the provisions of Divisions I and J of the Act.

A determination is an official written request by the taxpayer for the Minister to determine and notify a taxpayer as to certain amounts computed under the Act. The determination is followed by a notice of determination and, like an assessment, is subject to the rules referred to in subsection 152(1.2). In our view, the filing of a prescribed form under subsection 126.1(6) or (7) of the Act does not, in itself, constitute a request for determination and is, therefore, not subject to the rules and rights contained in Divisions I and J. A taxpayer may, however, under the provisions of subsection 152(3.4) of the Act, request in writing that the Minister determine the amount of the deemed overpayment. Such a formal request and the subsequent determination made under subsection 152(3.5) would be subject to the rules in Divisions I and J, as required by subsection 152(1.2) of the Act.

In summary, it is our view that there is no time limit for the filing of the prescribed form in order to give rise to the deemed overpayment under subsection 126.1(6) or (7) but the overpayment is not so deemed until the form is filed. The refund resulting from the deemed overpayment is to be issued without further application for it by the taxpayer, in accordance with subsection 164(1.6) of the Act. There is no notice of assessment issued with respect to the acceptance of the form or the issuance of the refund. It is, therefore, not subject to reassessment. If the Minister ascertains that the overpayment is an amount other than what was claimed, the taxpayer may request in writing for a determination to be made, with all due dispatch. Once made, such a determination would be subject to all the applicable provisions of Divisions I and J of the Act.

Should you require any further technical assistance in this matter please contact the writer at 957-2135.

B.W. Dath
Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch