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.
Principal Issues: Correspondence requested guidance on the deductibility of an employer's contributions to a health and welfare trust.
Position: General comments provided.
XXXXXXXXXX
Dear XXXXXXXXXX :
I am writing in response to your correspondence addressed to my predecessor, the Honourable Keith Ashfield, further to his of March 15, 2011, concerning the wind-up of XXXXXXXXXX Health and Welfare Trust (HWT). Please accept my apology for the delay in replying.
In your response to Mr. Ashfield's email, you indicate that practitioners require guidance on the deductibility of contributions made to an HWT and on the Canada Revenue Agency (CRA) policies that govern the administration of HWTs. You assert that contributions made to XXXXXXXXXX HWT should not have been deductible.
The Income Tax Act allows an employer to deduct contributions to an HWT in the year the legal obligation to make the payment to the trust arises if:
- the contributions are reasonable and laid out to earn business or property income, and
- the employer's contributions do not exceed the current amount required to provide the health and welfare benefits for a particular year, plus the reasonable administrative costs of the employer or the HWT.
While I am sympathetic to the situation facing the individuals you represent, the confidentiality provisions of the Act prevent me from discussing information on any matter that relates to a specific taxpayer without written authorization from that taxpayer.
The CRA is committed to applying the tax legislation consistently and fairly and strives to treat all taxpayers equally. Accordingly, it regularly carries out audits to ensure that taxpayers comply with the law.
I appreciate the opportunity to respond to your concerns.
Yours sincerely,
Gail Shea
Minister of National Revenue
Tom Posadovsky
613-952-8283
2011-040269
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