Volunteers of the New Brunswick Charity incur expenses in relation to the activities of the Charity and submit expense reports with receipts attached for mileage travelled and purchases made to carry out the Charity's charitable purposes. Some volunteers prefer to be reimbursed by cheque, while others prefer to donate these expenses to the Charity and receive an official donation receipt at year end. Can the Charity claim a public service bodies' (PSB) rebate where it: (1) reimburses a volunteer for their expenses; (2) pays an allowance to a volunteer, such as an allowance for mileage travelled; (3) pays a reimbursement or an allowance to a volunteer, but the volunteer later returns the payment to the Charity, or (4) issues an official donation receipt for a gift-in-kind of the expense?
After addressing the first two questions with a general discussion of ss. 175 and 174, CRA turned to the third question and stated:
The payment of the reimbursement or the allowance by the Charity and the later donation of all or part of this amount back to the Charity are two separate transactions for GST/HST purposes. If all the conditions of section 175 or section 174 are met, the tax deemed to have been paid is included in the calculation of the non-creditable tax charged in respect of the property or service for the claim period. … The fact that the volunteer later donates all or a part of the payment back to the Charity does not impact the Charity's PSB rebate entitlement.
Respecting the gift-in-kind, CRA stated:
For section 175 to apply, the Charity must pay an amount to the volunteer as a reimbursement. In this situation, the Charity does not actually pay an amount to the volunteer. Rather, the volunteer donates their right to reimbursement to the Charity as a gift-in-kind. Therefore, section 175 does not apply and the Charity cannot claim a PSB rebate … .
