Citation: 2006TCC458
Date: 2006080814
Docket: 2006-242(IT)I
BETWEEN:
BRUCE B. BRINE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
McArthur J.
[1] This is an appeal from a decision of the
Minister of National Revenue under paragraph 6(1)(f) of the Income
Tax Act, in which the Appellant was reassessed for the amount of $8,982.80
which he failed to include in his income in the 2003 taxation year.
[2] The Appellant was employed by Canada Ports
Corporation (“CPC”). While employed, he participated in the Public Service
Management Insurance Plan (PSMIP) which provided, amongst other things,
insurance coverage for wage loss replacement through The National Life of
Canada Group Accounting (“National Life”).
[3] In 2003, the Appellant received the amount
of $8,982.80 from National Life as wage loss insurance. The Minister included
that amount in the Appellant’s income for the year, based on paragraph 6(1)(f)
of the Act, which reads:
6(1) There shall
be included in computing the income of a taxpayer for a taxation year as income
form an office or employment such of the following amounts as are applicable:
(a) …
(f) the
total of all amounts received by the taxpayer in the year that were payable to
the taxpayer on a periodic basis in respect of the loss of all or any part of
the taxpayer's income from an office or employment, pursuant to
(i) a sickness or accident
insurance plan,
(ii)
a disability insurance
plan, or
(iii)
an income
maintenance insurance plan
to or under which the taxpayer's
employer has made a contribution, not exceeding the amount, if any, by which
(iv) the total
of all such amounts received by the taxpayer pursuant to the plan before the
end of the year and
(A) where there was a
preceding taxation year ending after 1971 in which any such amount was, by
virtue of this paragraph, included in computing the taxpayer's income, after
the last such year, and
(B) in any other case, after
1971,
exceeds
(v) the total
of the contributions made by the taxpayer under the plan before the end of the
year and
(A) where there was a
preceding taxation year described in clause (iv)(A), after the last such year,
and
(B) in any other case, after 1967;
[4] The Appellant argues that the amount should
not be included in his income as he paid the insurance premiums as part of an
employee pay-all plan which is not a plan within the meaning of paragraph 6(1)(f).
This position is based on paragraphs 16 and 17 of Interpretation Bulletin
IT-428 issued by Revenue Canada. Those paragraphs read:
Employee-Pay-All Plans
16. An employee-pay-all plan is a plan the
entire premium cost of which is paid by one or more employees. Except as
indicated under 21 below, benefits out of such a plan are not taxable even if
they are paid in consequence of an event occurring after 1973, because an
employee-pay-all plan is not a plan within the meaning of paragraph 6(1)(f)
17. It is a question of fact whether or
not an employee-pay-all plan exists and the onus is generally on the employer
to prove the existence of such a plan. It should be emphasized that the
Department will not accept a retroactive change to the tax status of a plan.
For example, an employer cannot change the tax status of a plan by adding at
year end to employees' income the employer contributions to a wage loss
replacement plan that would normally be considered to be non-taxable benefits.
On the other hand, where an employee-pay-all plan does, in fact, exist and it
provides for the employer to pay the employee's premiums to the plan and to
account for them in the manner of wages or salary, the result is as though the
premiums had been withheld from the employee's wages or salary. That is, the
plan maintains its status as an employee-pay-all plan if the plan provided for
such an arrangement at the time the payment was made.
[5] Counsel for the Respondent objected to any
reliance on this interpretation bulletin arguing that this Court is not bound
by such extrinsic aids. Additionally, this particular bulletin is quite dated
having been published in 1979. I find both arguments to be of little
consequence. Extrinsic aids such as interpretation bulletins are not binding
but where they have not been explicitly disregarded by jurisprudence they can
be helpful, as IT-428 is in this appeal. Accordingly, in order to find for the Appellant,
it would have to be determined that he contributed towards his insurance
premiums through an employee pay-all plan and that his employer, CPC, did not
contribute anything towards the insurance premiums.
[6] Counsel for the Appellant presented several
documents including the National Life Assurance Plan, and the Appellant’s PSMIP
form 4.9.9 which outlined the method of payments for the insurance premiums,
and the Appellant’s contract which stipulated the paying arrangement that would
be implemented towards premium insurance contributions. All three documents
indicated the same thing, namely, that CPC would deduct from the employee’s
salary the appropriate premium contributions. In addition, the Appellant’s
contract clearly states that those amounts would then be reimbursed in full to
the Appellant.
[7] The reimbursed amount appeared on the
Appellant’s T4 listed as either a taxable benefit or taxable allowance. I am
satisfied that the amount listed is in lieu of the premiums that were deducted
from his employment and are now being reimbursed. In Landry v. R.,
[1998] 2 C.T.C. 2712, Bowman J. acknowledged that premiums taken by the
employer from the employee’s salary were reimbursed to the employee and listed
as taxable benefits. Bowman J. was contending with a lump sum as opposed to
periodic payments as in this appeal, and paragraph 6(1)(f) was
specifically not raised by the Crown. Nonetheless, in delivering alternative
reasons for allowing Mrs. Landry’s appeal, which I accept and apply to the
present case, Justice Bowman said at paragraph 11:
There is a further reason for
not including the lump sum in Mrs. Landry's income. The employer, it is true,
paid the premiums in the first instance but they were included in Mrs. Landry's
income as a taxable benefit. In essence and in substance, the payments were
being made on her behalf by the employer. It would be a wholly unacceptable
result if she were to be taxed again when the benefits are paid. What she
received from London Life was received qua insured, not qua
employee. The benefit, which was taxed, lay in the employer's provision of
insurance coverage, not in the benefits paid by the insurer.
[8] Counsel for the Respondent presented
another PSMIP document which outlined the rates at which the employee and
employer were to contribute towards long-term disability insurance premiums.
The chart within that document illustrated the amount CPC would have to
contribute at the rate of $0.17525 for every $250. However, counsel for the
Appellant clarified that this was the policy in place for all non-executive
class employees (Exhibit A-3). The arrangement with executive class employees
was that they would be the sole contributors to their insurance premiums. I am
satisfied that the Appellant fell into the category of an executive class
employee. Consequently, I find that CPC was not contributing towards the
Appellant’s National Life insurance premiums as this was an employee pay-all
plan as described by IT-428. The documents presented by the Appellant evidence
that CPC was merely removing the designated amount from the Appellant’s income,
forwarding that amount to National Life and then reimbursing the Appellant.
[9] The
appeal is allowed and the assessment is referred back to the Minister of
National Revenue for reconsideration and reassessment to delete the sum of $8,982.80
from the Appellant's income for 2003.
Signed at Ottawa, Canada, this 14th day of August 2006.
"C.H. McArthur"
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