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: interest on retroactive workers' compensation benefits in B.C.
Position: exempt from tax
Reasons: Consistent with previous position on pre-judgement interest
July 15, 1998
Burnaby-Fraser Tax Services Office HEADQUARTERS
John Purda D. Duff
Director
Attention: Pinder Sidhu
981660
Interest on Payment of Retroactive Workers’ Compensation Benefits
This is in response to your round trip memorandum dated June 23, 1998, regarding the Department’s position on the treatment of the above noted interest.
The Workers’ Compensation Act of British Columbia (“WCA-BC”) previously provided that benefits to widows terminated on remarriage. In 1994, this act was amended to allow for the continuation of benefits for those who remarried after April 17, 1985. The amendment was to section 19 of the WCA-BC which provided for, the resumption of benefits, a retroactive payment of benefits, and interest on the retroactive payment.
Marlene Grigg (as part of a class action) took the Workers’ Compensation Board to court on the basis of discrimination under the Charter of Rights. The amendment did not apply to her because she remarried before April 17, 1985. The B.C. Supreme Court found in her favour so those who lost benefits prior to April 17, 1985 are having the benefits reinstated along with receiving the retroactive benefits plus interest.
We were asked to review the Grigg situation to determine if the interest should be included in income. Compensation received under a workers’ compensation law of a province in respect of an injury, a disability or death of an individual is included in income but an offsetting deduction is available so that such compensation is not subject to tax. The Department has a position that pre-judgement interest on certain retroactive workers’ compensation payments does not have to be included in calculating income. However, when we reviewed the information with respect to Ms. Grigg’s situation we concluded this position did not apply to her interest. Accordingly, on February 6, 1998, we wrote to the Penticton Tax Services Office and took the position that the interest should be taxed under paragraph 12(1)(c) with no offsetting deduction.
After receiving various submissions we revisited the issue and are now of the view that the interest should be treated the same as the pre-judgement interest on retroactive worker’s compensation payments. Consequently, it is our position that the interest in the Grigg case should simply be excluded when calculating income. This position also applies to interest paid to all widows who remarried on or after April 17, 1985. On May 26, 1998, we notified all tax services offices of this position through the public enquiries information bank.
We trust this will permit you to reply to the M.P.s that wrote to you on this issue. Also, please note that XXXXXXXXXX wrote to the Minister of National Revenue and a reply was prepared by this Directorate and sent for the Minister’s signature.
Bryan W. Dath
Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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