2 November 2004 GST/HST Interpretation 55568 - Definition of Taxi Business

Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.

Dear XXXXX:

The purpose of my letter is to confirm the information that was provided during our conference call XXXXX. In an email message XXXXX you forwarded a list of questions that served as the basis for our call. Each of the questions is listed below along with the response that was provided during the call.

Question 1

How broadly is the term "individual" defined under the proposed GST Exemption (e.g. does it encompass family members and groups seen together for health reasons)?

Response

The term "individual" can be interpreted broadly to encompass family members and groups provided that there is a professional-client relationship between the social worker and the individual. We would view the situation as treating an individual notwithstanding it is in a family or group setting.

It should be noted that services outside the professional-client relationship are not exempt. The explanatory notes, prepared by the Department of Finance, state: "if an organization hired a social worker to give a talk on alcohol dependency at a seminar open to the general public, the social worker's service would not be provided in the context of a professional-client relationship.... Therefore, the [service] would not be exempt".

Question 2

When can we anticipate that the proposed exemption will be enacted?

Response

Department of Finance officials have not indicated when the proposed legislation will be enacted, however, they have reaffirmed their commitment to proceeding with the proposed legislation.

Question 3

In the interim, what direction should be provided to our members who are being asked to remit GST payments?

Response

We have advised our Rulings Centres across the country that given that the amendment is proposed, social workers will have the option not to charge the tax or charge the tax and provide a refund once the amendment is enacted. A letter discussing the implications of these options was sent to XXXXX.

Question 4

How can we assist officials at CRA to establish criteria to determine which clinical services are eligible for GST Exemption? Currently considerable confusion is arising from conflicting messages about services that are or are not potentially eligible for exemption.

Response

Provincial Associations and individual social workers can assist the CRA by providing as much detail as possible when inquiring as to whether their services are exempt. For example, if the question is whether "counselling" services are exempt, we would require the specific details as to

what exactly is meant by "counselling" keeping in mind that, in order to be exempt, the service must be provided for the prevention, assessment or remediation of, or to assist the individual in coping with, a physical, emotional, behavioural, or mental disorder or disability....".

Question 5

Are clinical health services provided by registered social workers employed by a corporation GST exempt?

Response

If the contract for services is between the individual and the corporation, then the supply is not exempt. The corporation would not meet the requirement in the proposed amendment that the supplier's service is rendered in the practice of the profession of social work and that the supplier is licensed or otherwise certified to practise the profession of social work.

Other Issues

Input Tax Credits

We also discussed the issue of input tax credits (ITCs), specifically, ITCs may not be claimed to the extent that they relate to the making of an exempt service.

Custody and Access Assessments Provided by Social Workers

During our conference call you raised the issue of "court ordered reviews", which we understand are also referred to as "custody and access services". We had indicated that we required additional details as to what exactly these types of services encompass in order to make a determination as to whether they fall within the scope of the proposed exemption.

Accordingly, you provided the following comments by way of electronic mail XXXXX regarding custody and access services:

When a social worker conducts a custody and access assessment, and provides an expert opinion to the courts regarding what constitutes the best interests of a child/children, the process surrounding the information gathering and discussion of the recommendations is inherently preventative and/or therapeutic in nature. In other words, the process of involving the parents and a child/children in a discussion of the issues assists the parents focus on the child's best interests, addresses emotional issues and conflicts, and in essence, deals with issues that are important to the future well-being of the child/children.

Response

The Notice of Ways and Means Motion tabled by the Department of Finance on October 3, 2003, included a proposed amendment to the Excise Tax Act (the "ETA") to exempt from the GST/HST supplies made after that date of certain health-related services rendered in the practice of the profession of social work. The proposed amendment applies to social workers who are licensed or otherwise certified to practise the profession of social work in the province in which they supply their services. Where the supplier is not required to be licensed or otherwise certified to practise the profession of social work in the province in which the service is supplied, the supplier must have the equivalent qualifications to be licensed or certified in a province where there is such a requirement.

The type of services that fall with the proposed amendment are limited to services rendered to an individual within a professional-client relationship between the supplier and the individual, where those services are provided for the prevention, assessment or remediation of a physical, emotional, behavioural, or mental disorder or disability of the individual, or to assist the individual in coping with a disorder or disability of the individual or of another person to whom the individual is related or to whom the individual provides care or supervision otherwise than in a professional capacity.

The connection between an assessment to determine parent custody and access to a child and an assessment of a disorder or disability of an individual is not clear in your explanation. The services covered by the proposed amendment are supplies made by social workers of (a) counselling individuals for the purpose of preventing, assessing, correcting, or coping with, a disorder or disability of the individuals, or (b) of counselling family members or caregivers for the purpose of assisting them in coping with the disorder or disability of the other person.

As a transactional tax the application of the GST/HST is determined on a supply-by-supply basis. The approach behind the proposed amendment to the ETA is to exempt a supply of a particular service rendered to an individual on a fee-for-service basis. This is evident in the wording of the proposal, which is explicit in its limited application to specific services rendered to an individual by a person with specific qualifications. Within the context of the proposed amendment, there is a direct connection between the service and the individual to whom the service is rendered. Accordingly, whether a particular assessment of an individual for custody and access purposes that is provided by a social worker falls within the scope of the proposed amendment will be a question of fact.

We understand that the "Custody and Access Assessment" process for child custody and access purposes is performed at the request of the courts and results in an opinion provided to the courts.

Because of the specific criteria set out in the proposed amendment to the ETA, whether this assessment process can be described as inherently preventative or therapeutic in nature is not sufficient for determining whether the proposed amendment applies. Rather, it has to be demonstrated that these assessments are supplies enumerated in the proposed amendment; i.e., that the assessments constitute a supply made by a social worker of a service rendered to an individual within a professional-client relationship between the social worker and the individual. In addition, it must be demonstrated that the service is provided for the purpose of preventing, assessing or correcting a disorder or disability of the individual. Based solely on the description provided, it would appear that the "Custody and Access Assessment" would not fall within the proposed amendment.

Social workers are encouraged to contact their local Canada Revenue Agency office if they require additional information.

Yours truly,

Tim Krawchuk
Manager
Municipalities and Healthcare Services Unit
Public Service Bodies and Governments Division
Excise and GST/HST Rulings Directorate

2004/01/22 — RITS 38169 — Permanent Establishment