14 December 2010 External T.I. 2010-0368871E5 - PHSP premiums - 6(1)(a)(i)

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: An employee pays for his or her own PHSP premiums. At the end of the year, the employer gives the employee a cheque for the amount of the PHSP premiums the employee paid during the year. Is the amount of the cheque excluded as a benefit under paragraph 6(1)(a)(i)?

Position: No.

Reasons: The employee has full discretion as to the use of the amount of the cheque. We would not consider that the employer has paid PHSP premiums on behalf of an employee as the employee has paid the premiums.

XXXXXXXXXX
									2010-036887
									J. Gibbons, CGA

December 14, 2010

Dear XXXXXXXXXX :

Re: Reimbursement of an Employee's Private Health Services Plan ("PHSP)" Premiums

This is in reply to your letter dated May 13, 2010, concerning PHSP premiums paid by an employee.

You are asking for our views where an employee pays premiums to a PHSP and then receives a cheque from an employer which represents the amount of the premiums paid by the employee.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Nonetheless, we are prepared to offer the following general comments.

Subparagraph 6(1)(a)(i) of the Income Tax Act contemplates the exclusion of a taxable benefit from the employment income of an employee in respect of a benefit "derived from the contributions of the taxpayer's employer to or under a ... private health services plan." Generally, this condition will only be met if an employer contributes to a PHSP directly on behalf of an employee. If an employer gives an employee a cheque which represents the amount of the premiums the employee paid to a PHSP, we would consider the amount of the cheque to be fully taxable in the employee's hands as the employee has full discretion as to the use of the amount.

We trust these comments will be of assistance.

Yours truly,

G. Moore
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch