News of Note

A Quebec taxpayer, who got a job in Ottawa in 2007 along with an apartment there, was found to have continued to be resident in Quebec for his 2009 and 2010 years given that he maintained significant ties with Quebec including a significant other who stayed in Quebec and gave birth there to a child in 2010 and with the taxpayer visiting Quebec on a weekly basis. Furthermore, the taxpayer maintained various secondary Quebec ties such as bank accounts, car registration, Quebec rental properties and membership in the Quebec CPA order. Somewhat curiously, Pokomàndy JCQ found that the taxpayer did not become resident in Ontario until 2011 at the very earliest notwithstanding that the taxpayer and his significant other purchased a permanent home in Ottawa which the taxpayer, at the least, moved into in November 2010. (The provincial residency tests are based on status on December 31 of each year.)

Neal Armstrong. Summary of Fono v. Agence du revenu du Québec, 2018 QCCQ 10534 under s. 2(1).

CRA indicated that a health and welfare trust (“HWT”) which is jointly established by a union and multiple employers, can provide benefit coverage to non-unionized employees of participating employers, retired employees, and individuals who are not employees (i.e., dependants or survivors of current or retired employees where the underlying plan (i.e., a group sickness or accident insurance plan (“GSAIP”), a private health services plan (“PHSP”), or a group term life insurance policy (“GTLIP”)) allows for the provision of benefit coverage to such individuals – although a GTLIP may only provide benefit coverage to current and former (including retired) employees.

Although Folio S2-F1-C1 indicates that a trust funded only with contributions made by employees or an employee union would not qualify as a HWT, there is no explicit requirement that an employer be legally obligated to make contributions in respect of each plan or policy administered by a HWT. Accordingly:

[W]here is it established that retired employees may be provided benefit coverage through a GSAIP, PHSP, or GTLIP, and none of the participating employers have a legal obligation to pay any premiums or contributions in respect of the particular plan or policy, it would appear permissible for a HWT to administer such a plan or policy provided that the trust also administers other employer-funded plans or policies.

A HWT may administer a plan that offers drug and alcohol rehabilitation services, provided the plan qualifies as a PHSP, which entails a requirement inter alia that substantially all of the premiums paid under the plan relate to the coverage of medical expenses that are eligible for the medical expense tax credit.

Neal Armstrong. Summary of 22 January 2019 External T.I. 2016-0645581E5 under s. 6(1)(a)(i).

In the course of considering whether a determination by HMRC to issue advance payment notices to taxpayers before their appeals of tax assessments were heard amounted to an unlawful abuse of power (it did not), McCombe LJ discussed the tension between the desirability of HMRC developing and applying policies consistently while at the same time being mindful of the need to exercise its discretion. In this regard, he quoted with approval an earlier statement that

One aspect of the duty of fairness is that, in general, a decision- maker may not fetter his discretion. However, it is well established in public law that a decision- maker may formulate a policy to enable him to exercise a discretion consistently provided that it is not applied so rigidly that it precludes the proper exercise of discretion in each case.

And then stated:

The simple rule is, as Arden LJ said, the internal policy must not preclude a proper exercise of the statutory discretion in each case.

Neal Armstrong. Summary of Dickinson & Ors v Revenue and Customs [2018] EWCA Civ 2798 under ETA s. 315(3).

Australian electricity distributors were entitled to require their customers to pay an amount equal to the estimated net economic burden to the distributors of hooking them up to electricity, i.e., where the the present value of the incremental cost exceeded the present value of the incremental revenue. Moshinsky J found that these “Customer Cash Contribution” amounts were ordinary income to the distributors as they were received “as an ordinary incident of their electricity distribution businesses.” In Canada, the relevant distinction to be drawn likely would have been between a s. 9 receipt or (having regard to some similarities with the Consumers' Gas case) a s. 12(1)(x) receipt – keeping in mind that the s. 13(7.4) offset is potentially available only for the latter.

The customer could instead choose to perform the work, in which case, on transferring the constructed assets to a distributor, the distributor would pay a rebate that did not represent the full cost of the work, so that again, the customer effectively bore the excess of the present value of the incremental cost over the present value of the incremental revenue (the “Customer Contribution”). In finding that a Customer Contribution was not ordinary income to the distributor, Moshinsky J stated:

[T]he Customer Contribution was not a payment or gain received by the Distributor; it was merely a component used in the calculation of the [rebate] amount to be paid [the other way] by the Distributor to the customer.

Neal Armstrong. Summary of Victoria Power Networks Pty Ltd v Commissioner of Taxation [2019] FCA 77 under s. 9 - nature of income.