News of Note

This morning's release of two severed letters from the Income Tax Rulings Directorate is now available for your viewing.

The taxpayer’s eligibility for Canada child tax benefit for his son turned primarily on whether he qualified as the “eligible individual” for that child. The Crown pleaded that in the periods in question, the taxpayer “was not the parent primarily responsible for the care and upbringing of [the child],” i.e., it simply quoted from the relevant portion of the statutory definition of “eligible individual,” and did not refer to how any of the eight factors listed in Reg. 6302 for determining such primary responsibility applied, with the exception of a brief reference to a divorce judgment.

Russell J considered this pleading to be deficient, and found that, given that there was not much of a burden on the taxpayer regarding his “eligible individual” status, somewhat fluffy and poorly substantiated testimony of the taxpayer was sufficient to establish that the taxpayer so qualified for various periods in issue (other than those as to which the taxpayer had effectively conceded.)

Neal Armstrong. Summaries of Wachal v. The Queen, 2020 TCC 78 under s. 122.6 - eligible individual – (b)(ii) and s. 122.62(1).

A GST/HST registered U.S. corporation sold and delivered contact lenses (typically replacement contact lenses) to Canadian consumers without verifying that they had a matching prescription. In finding that such sales were not zero-rated under Sched. VI, Pt. II, s. 9 (which requires inter alia that the contract lenses “are, or are to be, supplied under the authority of a prescription prepared … by [a qualified practitioner] for the treatment or correction of a defect of vision,” Smith J stated:

[I]t is not sufficient … that the appellant's website inform the consumer of the need for a valid prescription. The appellant must itself obtain a copy of the prescription … from which it can be concluded that the consumer has a prescription "for the treatment or correction of a defect of vision."

Neal Armstrong. Summaries of Contact Lens King Inc. v. The Queen, 2020 CCI 71 under ETA Sched. VI, Pt. II, s. 9 and s. 286(1).

Graham J wrestled with the implications of the finding in Connor Homes that significant weight should be given to the subjective intention of the parties as to whether they were in an employer-employee, rather than independent contractor, relationship, before applying the objective indicia of whether there was an employment relationship set out in Wiebe Door and Sagaz (i.e., control, ownership of tools, opportunity for profit, and risk of financial loss). He considered that what this meant was that where, as here, the parties (an NPO providing educational services to industry members, and an instructor retained by it) clearly intended their relationship to be that of independent contractors rather than of employer and employee, it was not fatal that an application of the above objective factors indicated that there was an employment relationship. Instead, all that was required in such circumstances was that they “carry on their relationship in a manner that is similar to [rather than the same as] what one would expect from their intentions.”

Thus, although here, application of the four objective factors by themselves would have indicated an employment relationship, that application only fell somewhat short of the mark (e.g., although the instructor had no risk of loss, he had an opportunity for gain in the somewhat limited sense of “an ability to increase his effective earnings through up-front investment and efficiencies in a manner similar to that of an independent contractor”), so that their relationship was that of independent contractors.

Neal Armstrong. Summary of Insurance Institute of Ontario v. M.N.R., 2020 TCC 69 under s. 5(1).