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: Would an outsourcing arrangement where employees are employed by another entity who contracts to provide the employment services back to the employer result in the acquisition of a business?
Position: question of fact
Reasons: Cannot make the determination without all of the facts.
XXXXXXXXXX 980363
M. P. Sarazin
Attention:XXXXXXXXXX
April 20, 1998
Dear Sirs:
Re: Related Employers for Purposes of Paragraph 60(j.1) of the Income Tax Act (the “Act”)
This is in reply to your letter dated February 9, 1998, wherein you requested our views as to whether two employers would be considered related employers by virtue of subparagraph 60(j.1)(iv) of the Act where one employer (“Employer A”) outsources the jobs of its employees to another employer (Employer B”).
Your enquiry appears to relate to specific taxpayers involved in specific completed transactions. Enquiries in respect of completed transactions should be addressed to the relevant tax services office. Consequently, we can only provide you with the following general comments.
For the purposes of subparagraph 60(j.1)(iv) of the Act, it is a question of fact as to whether or not Employer B carried on a business and whether or not Employer B acquired or continued the business of Employer A. In our view, it is unlikely that an outsourcing arrangement would result in the acquisition or continuation of a business by Employer B which was previously carried on by Employer A. Generally, in our view, outsourcing would include only some portion of activities that, in and of themselves, would not constitute a business of the employer undertaking the outsourcing (i.e. Employer A). In determining whether Employer B was, in fact, carrying on a business, we would refer you to Interpretation Bulletin IT-206R which deals with separate businesses.
We trust that the above comments will be of assistance to you.
Yours truly,
Paul Lynch
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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