IWK Health – Federal Court of Appeal declines to depart from Westcoast’s finding that employers could not claim HST on the reimbursed health care expenses of their employees

Some Nova Scotia hospitals reimbursed (through a health care plan administrator) their employees for the employees’ costs (including HST) of acupuncture, massage therapy, naturopathy, or homeopathy services. The hospitals took the position that they were deemed by s. 175 to have received those care services themselves, and claimed public service body (PSB) rebates accordingly.

The Tax Court had followed the FCA decisions in Westcoast Energy and ExxonMobil in rejecting this position, stating that those services were “of a particularly personal and individual nature” and that she would expect the employees “to access these types of services on their personal time.” Accordingly, these services did not satisfy the s. 175 test of being “for consumption or use … in relation to activities” of the hospitals.

On appeal, the taxpayers were unsuccessful in establishing that those two decisions were manifestly wrong, i.e., they overlooked a relevant statutory provision or a case that ought to have been followed. In particular, although neither case mentioned General Motors, this could be explained by that case being concerned with expenses incurred by the employer, rather than (as in the above two cases) with expenses incurred by the employees and later reimbursed by the employer.

Neal Armstrong. Summary of IWK Health Centre v. Canada, 2026 FCA 113 under ETA s. 175(1).