cpp/ei and trust accounts division headquarters vicky adams lorraine maisonneuve caubo saskatoon -...

CPP/EI and Trust Accounts Division

HeadquartersHeadquartersVicky AdamsVicky Adams

Lorraine MaisonneuveLorraine Maisonneuve

CAUBOCAUBOSASKATOON - SASKATOON - JUNE 2004JUNE 2004


CPP/EI DivisionCPP/EI Division


Responsibilities under the EI Responsibilities under the EI LegislationLegislation

HRSDHRSD

Under the EI Act, Human Resources and Skills Under the EI Act, Human Resources and Skills Development (HRSD) is responsible for:Development (HRSD) is responsible for:

Legislative provisions of the EI Act and EI Legislative provisions of the EI Act and EI Regulations Regulations that establish insurable employment.that establish insurable employment.

Matters related to the determination (qualification Matters related to the determination (qualification for for benefits), entitlement (amount to be paid), and benefits), entitlement (amount to be paid), and payment of payment of benefits.benefits.

Administering most of the EI Legislation.Administering most of the EI Legislation.



Canada Revenue AgencyCanada Revenue Agency (CRA) (CRA)

Collect all EI premiums.Collect all EI premiums.

Determine the insurability of an Determine the insurability of an employment, the earnings and the hours.employment, the earnings and the hours.

Develop and maintain the EI Insurable Develop and maintain the EI Insurable Earnings and Collection of Premium Earnings and Collection of Premium Regulations under EI Legislation.Regulations under EI Legislation.



Canada Revenue Agency (cont’d)Canada Revenue Agency (cont’d)

The CRA has similar responsibilities under the Canada Pension The CRA has similar responsibilities under the Canada Pension Plan with respect to:Plan with respect to:

Collection CPP contributions.Collection CPP contributions.

Determining the pensionability of an employment and the Determining the pensionability of an employment and the earnings.earnings.

In order to make these determinations, we conduct CPP/EI In order to make these determinations, we conduct CPP/EI RulingsRulings..


What is a CPP/EI RulingWhat is a CPP/EI Ruling??A Ruling is a formal determination of:A Ruling is a formal determination of:

Whether a person is employed or self-employed.Whether a person is employed or self-employed.

Whether an employment is pensionable and/or Whether an employment is pensionable and/or insurable.insurable.

Whether earnings are pensionable and/or insurable.Whether earnings are pensionable and/or insurable.

Whether the hours are insurable.Whether the hours are insurable.


How CRA determines whether a worker is an employee or independent contractor


The Four in One TestThe Four in One Test

In Canada, with the exception of the province of In Canada, with the exception of the province of Quebec which has the Civil Code, Common Law is Quebec which has the Civil Code, Common Law is applicable.applicable.

Over time, the Courts have established tests that Over time, the Courts have established tests that could be used to determine a workers employment could be used to determine a workers employment status.status.

The test that is currently in use by the Courts and The test that is currently in use by the Courts and which the CRA also uses when making a ruling, is which the CRA also uses when making a ruling, is called the four in one test.called the four in one test.



The four in one test was outlined in the The four in one test was outlined in the Federal Court of Appeal decision of Wiebe Federal Court of Appeal decision of Wiebe Door Services Ltd. Door Services Ltd. v. v. The Minister of The Minister of National Revenue [1986] 3 F.C. 553 and was National Revenue [1986] 3 F.C. 553 and was confirmed in the Supreme Court of Canada confirmed in the Supreme Court of Canada decision in 67122 Ontario Ltd. v Sagaz decision in 67122 Ontario Ltd. v Sagaz Industries Canada Inc (2001) SCR 983. Industries Canada Inc (2001) SCR 983.



This test consists of looking at four elements:This test consists of looking at four elements:1. The right of control;1. The right of control;2. Ownership of tools and equipment;2. Ownership of tools and equipment;3. Chance of profit and risk of loss; and3. Chance of profit and risk of loss; and4. Integration.4. Integration.

Intent should only be used when other factors Intent should only be used when other factors are inconclusive.are inconclusive.



What is important to understand about the four in What is important to understand about the four in one test is that it is the entire scheme of operations one test is that it is the entire scheme of operations between the worker and payer that must be between the worker and payer that must be considered.considered.

There is no one factor that determines whether or not There is no one factor that determines whether or not a person is an employee or an independent a person is an employee or an independent contractor; all factors are relevantcontractor; all factors are relevant..



Under the Civil Code in Quebec, the test of Under the Civil Code in Quebec, the test of subordination is used to determine a worker’s subordination is used to determine a worker’s employment status.employment status.

There is very little difference between the There is very little difference between the application of these two tests and the result will be application of these two tests and the result will be the same. For this reason, and to ensure consistency the same. For this reason, and to ensure consistency in approach , the CRA uses the four in one test to in approach , the CRA uses the four in one test to determine a worker’s employment status.determine a worker’s employment status.


ControlControl


The Right of ControlThe Right of Control

In an employer-employee relationship, the employer In an employer-employee relationship, the employer has the has the right to direct and controlright to direct and control the worker in the the worker in the way the work is done by telling the worker when, way the work is done by telling the worker when, where and how the work will be done. where and how the work will be done.

It is not necessary for the employer to exercise this It is not necessary for the employer to exercise this control as long as it can be determined that the control as long as it can be determined that the employer has the right to exercise the control, if and employer has the right to exercise the control, if and when the employer wishes to do so. However, the when the employer wishes to do so. However, the more control an employer actually exercises over a more control an employer actually exercises over a worker, the stronger the case will be that the worker is worker, the stronger the case will be that the worker is an employee.an employee.


IndicatorsIndicatorsRemunerationRemuneration

Wages, salary, hourly rateWages, salary, hourly ratePiece workPiece workCommissions, etcCommissions, etc

TimeTimeFull or Part timeFull or Part timeContinuousContinuousDeadlinesDeadlinesPrioritiesPriorities

AutonomyAutonomyPeriodic reporting, oral or writtenPeriodic reporting, oral or writtenPersonal services requiredPersonal services requiredPrescribed work methodPrescribed work method

InstructionsInstructionsOrdersOrdersDirectivesDirectivesTrainingTraining

BenefitsBenefitsWorker’s compensationWorker’s compensationGroup, accident, health & dental plans, Group, accident, health & dental plans, pensionpensionCollective Agreement Collective Agreement

PlacesPlacesPayer’s officePayer’s officeWorker’s residenceWorker’s residenceOn the roadOn the road

ResponsibilitiesResponsibilitiesSelection & dismissal of workersSelection & dismissal of workersEstablishing work methodsEstablishing work methodsSafety measures in the work placeSafety measures in the work place

FacilitiesFacilitiesMaterialsMaterialsOfficesOfficesVehiclesVehicles


Ownership of tools and Ownership of tools and equipmentequipment


Ownership of tools and Ownership of tools and equipmentequipment

The fact that a worker uses his or her own The fact that a worker uses his or her own tools or equipment is not sufficient to say the tools or equipment is not sufficient to say the worker is an independent contractor. In some worker is an independent contractor. In some occupations it is customary for the worker to occupations it is customary for the worker to provide his or her own tools.provide his or her own tools.


Chance of profit//Risk of lossChance of profit//Risk of loss


PROFITPROFIT

Profit is defined as the Profit is defined as the excess of revenuesexcess of revenues over over expenditures.expenditures.

The chance of profit is The chance of profit is associated with one carrying associated with one carrying on a business.on a business.

Profit should not be Profit should not be confused with remuneration confused with remuneration or increase revenue.or increase revenue. For For instance, working overtime.instance, working overtime.

LOSSLOSS

A loss is defined as an A loss is defined as an excess of expendituresexcess of expenditures over over revenues. The chance of revenues. The chance of incurring a loss is also incurring a loss is also associated with one carrying associated with one carrying on a business.on a business.

An employee generally does An employee generally does not incur expenses, nor does not incur expenses, nor does an employee bear the risk of an employee bear the risk of incurring a lossincurring a loss


Chance of Profit – Risk of LossChance of Profit – Risk of Loss

An independent contractor assumes all risk An independent contractor assumes all risk for loss that results from events that occur for loss that results from events that occur during the course of the work and that were during the course of the work and that were not (or could not have been) foreseen when not (or could not have been) foreseen when the contract was negotiated. If, on the other the contract was negotiated. If, on the other hand, the work is completed sooner or more hand, the work is completed sooner or more easily than expected, the independent easily than expected, the independent contractor will have a greater profit.contractor will have a greater profit.


IntegrationIntegration


IntegrationIntegration

An employee is employed as part of a business, An employee is employed as part of a business, whereas, an independent contractor is an accessory whereas, an independent contractor is an accessory to the business (even though the work is done for the to the business (even though the work is done for the business).business).

Another way of looking at this test is asking the Another way of looking at this test is asking the question: question: Whose business is itWhose business is it??

Normally the more economically dependent a Normally the more economically dependent a worker is on the employer, the more likely the worker is on the employer, the more likely the worker is an employee.worker is an employee.


CorporationsCorporations

In some instances a worker may set up a corporation In some instances a worker may set up a corporation (A) which in turn does work for another corporation (A) which in turn does work for another corporation (B). It could even happen that the worker used to be (B). It could even happen that the worker used to be an employee of (B).an employee of (B).

In general, as long as the worker has properly set up In general, as long as the worker has properly set up (A), has resigned from any previous employment (A), has resigned from any previous employment contract with (B), and the contract is between the contract with (B), and the contract is between the two corporations, that worker would no longer be an two corporations, that worker would no longer be an employee of (B). However, the worker would employee of (B). However, the worker would normally become an employee of (A).normally become an employee of (A).


Recent Court DecisionsRecent Court DecisionsThe Supreme Court of Canada decision in 671122 The Supreme Court of Canada decision in 671122 Ontario Ltd. Ontario Ltd. v.v. Sagaz Industries Canada Inc. Sagaz Industries Canada Inc. [2001] SCJ 61. confirmed the use of the four in [2001] SCJ 61. confirmed the use of the four in one test.one test.It bears repeating that the factors constitute a non-It bears repeating that the factors constitute a non-exhaustive list, and there is no set formula as to exhaustive list, and there is no set formula as to their application. The relative weight of each will their application. The relative weight of each will depend on the particular facts and circumstances depend on the particular facts and circumstances of the caseof the case.”.”


Recent Court DecisionsRecent Court DecisionsMore recently, the Federal Court of Appeal decision in More recently, the Federal Court of Appeal decision in Lawrence Wolf Lawrence Wolf vv. The Minister of National Revenue . The Minister of National Revenue [2002] FCJ 375 also confirmed the use of the four in [2002] FCJ 375 also confirmed the use of the four in one test. one test. That decision also confirmed another important point; That decision also confirmed another important point; that that the terms of the written contract between the the terms of the written contract between the worker and the payer will only be given weight if they worker and the payer will only be given weight if they properly reflect the relationship between the partiesproperly reflect the relationship between the parties..Intent only to be used when other factors are inclusive.Intent only to be used when other factors are inclusive.


Contract for ServicesContract for Services

A contract for serviceA contract for serviceis an arrangement wherebyis an arrangement wherebyone party agrees to performone party agrees to performspecific servicesspecific services for another for another partyparty


TeachersTeachers


DefinitionsDefinitionsWithout limiting the scope of this definition, by “teacher”, Without limiting the scope of this definition, by “teacher”, we mean: we mean:

Any person hired to teach by a board, commission, school, Any person hired to teach by a board, commission, school, college or university, who is recognized in this capacity by the college or university, who is recognized in this capacity by the provincial or territorial ministry of education.provincial or territorial ministry of education.

It can apply to professor, educator, lecturer and instructor. It can apply to professor, educator, lecturer and instructor. For the purpose of this presentation, they will be referred to For the purpose of this presentation, they will be referred to as “teachers”.as “teachers”.

Teaching staff at recognized educational institutions in Teaching staff at recognized educational institutions in Canada are generally hired under a contract of service.Canada are generally hired under a contract of service.


Multiple contracts of Multiple contracts of employment (EI and CPP)employment (EI and CPP)

By “By “multiple employmentmultiple employment” we mean a worker who performs ” we mean a worker who performs different services for one and the same employer under different services for one and the same employer under separate contractsseparate contracts. This situation is treated the same way . This situation is treated the same way for Employment Insurance and the Canada Pension Plan. for Employment Insurance and the Canada Pension Plan. In these circumstances, it must be clearly understood that it In these circumstances, it must be clearly understood that it is the is the employmentemployment of the person, not the person himself or of the person, not the person himself or herself that is considered as being covered by both systems herself that is considered as being covered by both systems (EI and CPP). As with establishing a contract of service, the (EI and CPP). As with establishing a contract of service, the facts surrounding the employment (conditions of facts surrounding the employment (conditions of employment) must be taken into account, not the person employment) must be taken into account, not the person performing it.performing it.


Multiple contracts of Multiple contracts of employment (EI and CPP)employment (EI and CPP)

Each contract of employment must be examined Each contract of employment must be examined separatelyseparately when evaluating the application of the when evaluating the application of the Employment Insurance and Canada Pension Plan Employment Insurance and Canada Pension Plan regulations. One way to determine whether they are regulations. One way to determine whether they are separate contracts or only one contract of separate contracts or only one contract of employment when there is no written contract employment when there is no written contract between the parties is to decide whether the person between the parties is to decide whether the person who performs the services, the teacher for example, who performs the services, the teacher for example, would lose “would lose “his/her jobshis/her jobs” if his/her performance was ” if his/her performance was deemed unsatisfactory on one of these contracts.deemed unsatisfactory on one of these contracts.


Teacher exchange programTeacher exchange program(EI and CPP)(EI and CPP)

Provision is made in the legislation governing Provision is made in the legislation governing both systems for exclusions from both systems for exclusions from Employment Insurance and the CPP under Employment Insurance and the CPP under certain circumstances in order to prevent certain circumstances in order to prevent both both employersemployers from being required to make from being required to make contributions on behalf of one individual for contributions on behalf of one individual for one jobone job



Employment Insurance: Employment Insurance: Insurable employment will not Insurable employment will not include:include:

i) employment of a foreign teacher under an exchange program i) employment of a foreign teacher under an exchange program who performs services in Canada if the employment is not who performs services in Canada if the employment is not remunerated by an employer that is resident in Canada;remunerated by an employer that is resident in Canada;

ii)ii) employment of a Canadian teacher that is remunerated by a employment of a Canadian teacher that is remunerated by a foreign employer for services performed outside Canada.foreign employer for services performed outside Canada.

Reference: Paragraph 5(2)(f) of the EIA and Reference: Paragraph 5(2)(f) of the EIA and Section 5 of the EI RegulationsSection 5 of the EI Regulations



Canada Pension Plan: Canada Pension Plan: Employment that Employment that will not be covered by the CPP:will not be covered by the CPP:

i)i) employment of a teacher under an employment of a teacher under an exchange program with a country other exchange program with a country other than Canada.than Canada.

Reference: Paragraph 6(2)(c) of the CPPReference: Paragraph 6(2)(c) of the CPP


Educational speaker orEducational speaker or Guest Lecturer Guest Lecturer

Some educational institutions retain the services of a Some educational institutions retain the services of a person to give one or more lectures on a topic this person to give one or more lectures on a topic this person specializes in. The rate of pay for this type of person specializes in. The rate of pay for this type of service and the duration of the lecture is generally service and the duration of the lecture is generally fixed. Most of these speakers ask to be treated as self-fixed. Most of these speakers ask to be treated as self-employed workers for various reasons. We have employed workers for various reasons. We have identified three types of speakers:identified three types of speakers:

• Self-employed workersSelf-employed workers• EmployeesEmployees• Part-time speakersPart-time speakers


Self-employed workersSelf-employed workers

Speakers who give only one or two lectures Speakers who give only one or two lectures for an employer would not normally be for an employer would not normally be considered to be under a contrract of considered to be under a contrract of service.service.


EmployeesEmployees

However, we will consider that an However, we will consider that an employer/employee relationship (contract of service) employer/employee relationship (contract of service) exists if:exists if:

i)i) the specialist is recruited to replace a regular teaching the specialist is recruited to replace a regular teaching staff member and is subject to the same conditions of staff member and is subject to the same conditions of employment as this member; oremployment as this member; or

ii)ii) the establishment has created a permanent position for the establishment has created a permanent position for this purpose to be occupied by guest speakers on a part-this purpose to be occupied by guest speakers on a part-time basis.time basis.


Part-Time SpeakerPart-Time Speaker

A part-time speaker is not deemed to run a business A part-time speaker is not deemed to run a business consisting in giving speeches. He/she is an integral consisting in giving speeches. He/she is an integral part of the institution’s activities, and in this part of the institution’s activities, and in this capacity, finds himself or herself in the same capacity, finds himself or herself in the same situation as regular employees of this institution. situation as regular employees of this institution. Having a professional or specialist status does not Having a professional or specialist status does not mean that the person cannot be an employee. The mean that the person cannot be an employee. The facts in the particular case determine whether an facts in the particular case determine whether an employer/employee relationship exists, not a employer/employee relationship exists, not a particular status.particular status.


Research assistantsResearch assistants

At the university level, we often find students who At the university level, we often find students who do graduate or post-graduate research and for which do graduate or post-graduate research and for which they receive money from bursaries or grants. These they receive money from bursaries or grants. These students are generally called “students are generally called “research assistantsresearch assistants”. ”. Since universities manage these research programs Since universities manage these research programs in different ways, the four in one test must be in different ways, the four in one test must be examined in each case.examined in each case.

Reference IT Bulletin 75R3Reference IT Bulletin 75R3


HoursHours

In principle, in the field of teaching, the employer In principle, in the field of teaching, the employer knows the exact number of hours of teaching and the knows the exact number of hours of teaching and the number of hours a week or session the teacher must number of hours a week or session the teacher must be available if applicable. be available if applicable.

The number of hours actually worked will be the The number of hours actually worked will be the issue of most disputes concerning the Employment issue of most disputes concerning the Employment Insurance regulations. We deal with the issue of Insurance regulations. We deal with the issue of hours as follows:hours as follows:


HoursHours

When provision is made in a collective agreement or When provision is made in a collective agreement or contract of employment only for the hours of contract of employment only for the hours of teaching time paid and not the hours paid but teaching time paid and not the hours paid but associated with teaching duties (course preparation, associated with teaching duties (course preparation, marking tests, meetings and committees, etc..) or marking tests, meetings and committees, etc..) or with the teacher’s availability, an agreement between with the teacher’s availability, an agreement between the employer and the teachers concerned on the the employer and the teachers concerned on the estimated number of hours worked will be accepted estimated number of hours worked will be accepted insofar as this number of hours is reasonable under insofar as this number of hours is reasonable under the circumstances.the circumstances.


HoursHours

When an agreement between an employer and its When an agreement between an employer and its teachers concerning an estimated number of hours teachers concerning an estimated number of hours worked and remunerated is not considered worked and remunerated is not considered reasonable by HRSD, the latter may ask the Minister reasonable by HRSD, the latter may ask the Minister of National Revenue for a ruling. CRA will then of National Revenue for a ruling. CRA will then proceed with an evaluation of the conditions of proceed with an evaluation of the conditions of employment and will establish the number of hours employment and will establish the number of hours worked and paid by taking into account the number worked and paid by taking into account the number of hours normally worked to perform similar duties, of hours normally worked to perform similar duties, under the circumstances and according to the facts under the circumstances and according to the facts presented by the parties involved.presented by the parties involved.


HoursHours

In situations in which the employer cannot establish In situations in which the employer cannot establish with certainty the exact number of hours worked by with certainty the exact number of hours worked by a teacher for a given period of work and no provision a teacher for a given period of work and no provision is made in an agreement between the parties for an is made in an agreement between the parties for an evaluation mechanism, or when the teacher objects evaluation mechanism, or when the teacher objects to the hours indicated on the Record of Employment, to the hours indicated on the Record of Employment, the parties involved or HRSD could ask the Minister the parties involved or HRSD could ask the Minister of National Revenue for a ruling, as mentioned of National Revenue for a ruling, as mentioned above under reasonablenessabove under reasonableness


CPP/EI Web addressCPP/EI Web address

Following is the address to the CPP/EI ExplainedFollowing is the address to the CPP/EI Explained

http://www.cra-arc.gc.ca/tax/business/topics/payroll/ruling-e.hhttp://www.cra-arc.gc.ca/tax/business/topics/payroll/ruling-e.htmltml

and the address to the CPP/EI guide and forms is:and the address to the CPP/EI guide and forms is:

http://www.ccra-adrc.gc.ca/formspubs/topics/cpp_ei_rulings-ehttp://www.ccra-adrc.gc.ca/formspubs/topics/cpp_ei_rulings-e.html.html


TRUST ACCOUNTS TRUST ACCOUNTS DIVISIONDIVISION

Employment BenefitsEmployment Benefits


Responsibility Responsibility

Department of Finance is responsible for Department of Finance is responsible for fiscal policy and income tax legislation.fiscal policy and income tax legislation.

CCRA is responsible for administering the CCRA is responsible for administering the Income Tax Act. Income Tax Act.

The two liaise closely on income tax The two liaise closely on income tax legislation. legislation.


Policy and Technical ServicesPolicy and Technical Services

Develop and communicate national policies Develop and communicate national policies and procedures for payroll deductions and and procedures for payroll deductions and taxable benefits. taxable benefits.

Provide technical support to field offices Provide technical support to field offices and external clients.and external clients.

Administer the taxable benefits provisions.Administer the taxable benefits provisions.


What Is a Benefit?What Is a Benefit?

When an employee receives : When an employee receives : a benefit,a benefit,a gift, or a gift, or an awardan award

from an employer, he is in receipt of a benefit from an employer, he is in receipt of a benefit that is either taxable or non-taxable.that is either taxable or non-taxable.


Defining BenefitsDefining Benefits

Unless specifically excluded by the Act:Unless specifically excluded by the Act: the the value value of board, lodging and other of board, lodging and other

benefits of any kind benefits of any kind received or enjoyed; received or enjoyed; and and

all amounts received as an allowance for all amounts received as an allowance for personal and living expenses personal and living expenses

must be included in income. must be included in income.


Automobile BenefitAutomobile Benefit

Taxable benefit occurs when an employer Taxable benefit occurs when an employer provides an automobile and it’s used for provides an automobile and it’s used for personal use such as : personal use such as : vacation travel;vacation travel;driving for personal business; ordriving for personal business; ortravel between home and the work place. travel between home and the work place.


Personal UsePersonal Use

Transportation between home and the Transportation between home and the regularregular work place. work place.

ExceptionsExceptionstravel directly between home and a point of call travel directly between home and a point of call

other than the regular work place (salesman); other than the regular work place (salesman); for security, employer provides transportation for security, employer provides transportation

from a pick-up point to job location;from a pick-up point to job location; orortravel after overtime under certain conditions. travel after overtime under certain conditions.


Calculation of BenefitCalculation of Benefit

Is the vehicle an “automobile” as defined in Is the vehicle an “automobile” as defined in the Act?the Act?

What is the cost of running the automobileWhat is the cost of running the automobile ((operating cost)? operating cost)?

How many days was the “automobile” made How many days was the “automobile” made available to the employee (standby charge)?available to the employee (standby charge)?

Is there a reduced standby charge?Is there a reduced standby charge?


Reduced Standby ChargeReduced Standby Charge

For 2003 and later tax yearsFor 2003 and later tax years The standby charge can be The standby charge can be reducedreduced if: if: personal driving does not exceed 1,667 km a personal driving does not exceed 1,667 km a

month (20,004 km per year); andmonth (20,004 km per year); and

primarily primarily – more than 50% – of the driving is for – more than 50% – of the driving is for business purposes. business purposes.


Records to KeepRecords to Keep

Employee and employer should keep Employee and employer should keep records of automobile use.records of automobile use.

Records should include:Records should include:

– Total business kms driven; and Total business kms driven; and

– Total personal kms drivenTotal personal kms driven ..


Automobile Allowance Automobile Allowance

An allowance given to the employee for the use of An allowance given to the employee for the use of his own vehicle.his own vehicle.

Not taxable if the allowance is reasonable:Not taxable if the allowance is reasonable:it’s based solely on the number of business kms it’s based solely on the number of business kms

driven;driven;the rate per km is reasonable (per Reg. 7306); the rate per km is reasonable (per Reg. 7306); andandthe employee is not reimbursed for expenses.the employee is not reimbursed for expenses.

A flat-rate allowance is taxable.A flat-rate allowance is taxable.


Scholarships/Fellowships/Scholarships/Fellowships/Bursaries/PrizesBursaries/Prizes

The Act [The Act [56(1)(n)]56(1)(n)] includes in income the total of includes in income the total of all amounts received for:all amounts received for:Scholarships;Scholarships;Fellowships;Fellowships;Bursaries; or Bursaries; or Prizes for achievement in a field of endeavor ordinarily Prizes for achievement in a field of endeavor ordinarily carried on by the employee (other than prescribed prize). carried on by the employee (other than prescribed prize).

May be subject to a $3,000 exemption May be subject to a $3,000 exemption under 56(3). under 56(3).


Scholarships/BursariesScholarships/Bursaries

Amounts paid to students to: Amounts paid to students to: enable them to pursue their education; orenable them to pursue their education; or assist them in proceeding towards a degree, assist them in proceeding towards a degree,

diploma, or other certificate of graduation.diploma, or other certificate of graduation.

May apply to any field of study, academic May apply to any field of study, academic

discipline, professional program, trade ordiscipline, professional program, trade or

skill.skill.

Includes allowances for specific educational costs, Includes allowances for specific educational costs,

i.e. lodging, personal travel, tools, books etc. i.e. lodging, personal travel, tools, books etc.


Scholarships/Fellowships/Scholarships/Fellowships/Bursaries/PrizesBursaries/Prizes

Does not apply [not income under 56(1)(n)] to:Does not apply [not income under 56(1)(n)] to:amounts received in the course of business or to amounts received in the course of business or to

amounts received by virtue of an office or amounts received by virtue of an office or employment;employment;

grantsgrants received in a year to enable the received in a year to enable the individual to carry on research or any similar individual to carry on research or any similar work [income per 56(1)(o)]; orwork [income per 56(1)(o)]; or

student loans, training allowances [income per student loans, training allowances [income per 56(1)(r)]. 56(1)(r)].


FellowshipsFellowships

Amounts paid to a graduate student to Amounts paid to a graduate student to enable them to advance their education.enable them to advance their education.

Generally awarded for doctoral studies and Generally awarded for doctoral studies and post-doctoral work.post-doctoral work.

Normally included under 56(1)(n) if Normally included under 56(1)(n) if awarded to further the education and awarded to further the education and training of the recipient, but can also be a training of the recipient, but can also be a grant under 56(1)(o) if primary purpose is grant under 56(1)(o) if primary purpose is to carry out research for its own sake. to carry out research for its own sake.


Student AssistantshipsStudent Assistantships

A student may be in receipt of a fellowship A student may be in receipt of a fellowship AND employment income when he agrees AND employment income when he agrees to do some teaching, marking of papers etc.to do some teaching, marking of papers etc.

The two parts are treated differently for The two parts are treated differently for income tax purposes:income tax purposes:– the amount received as fellowship is income the amount received as fellowship is income

under 56(1)(n) and the employment income is under 56(1)(n) and the employment income is taxed under 5(1). taxed under 5(1).


Student LoansStudent Loans

A A genuinegenuine loan to assist in financing a loan to assist in financing a student’s education is not income to the student’s education is not income to the student.student.

Provisions must be made for repayment Provisions must be made for repayment within a reasonable time. within a reasonable time.


PrizesPrizes

The recipient must be rewarded for success The recipient must be rewarded for success in an area in which the recipient regularly in an area in which the recipient regularly applies effort. applies effort.

Paid in recognition of a genuine Paid in recognition of a genuine accomplishment in a challenging area, accomplishment in a challenging area, whether it be academic, vocational or whether it be academic, vocational or technical nature. technical nature.


Paid Tuition Fess for Paid Tuition Fess for DependantDependant

May be considered as scholarship income May be considered as scholarship income [[56(1)n)]56(1)n)] to the recipient if: to the recipient if: – the payment is made as part of the plan to help the payment is made as part of the plan to help

a a certain number of children who are selectedcertain number of children who are selected on the basis of scholastic record or other on the basis of scholastic record or other achievements or qualities by a board or achievements or qualities by a board or committee or persons not connected to the committee or persons not connected to the employer. employer.


Paid Tuition Fess for Paid Tuition Fess for DependantDependant

In other casesIn other cases, amounts paid to assist in the , amounts paid to assist in the education of dependants may be income to education of dependants may be income to the parent/employee pursuant to 6(1)(a).the parent/employee pursuant to 6(1)(a).


RemoteRemote Location, Special Location, Special Work SiteWork Site

Not taxable per 6(6): Not taxable per 6(6): when allowances for board and lodging and when allowances for board and lodging and transportation are provided for employment transportation are provided for employment at a at a “remote work location”“remote work location” or a or a “special “special work site”work site” when certain conditions are met. when certain conditions are met.


Administrative PositionsAdministrative Positions

Administratively, CCRA does not consider Administratively, CCRA does not consider certain benefits to be taxable, i.e. subsidized certain benefits to be taxable, i.e. subsidized meals , certain moving expenses, uniforms meals , certain moving expenses, uniforms and special clothing…and special clothing…

We conduct periodic reviews of our We conduct periodic reviews of our administrative positions.administrative positions.

Result: modernized our position on the Result: modernized our position on the taxation of employer provided gifts & taxation of employer provided gifts & awards for the year 2001 & following. awards for the year 2001 & following.


Gifts/AwardsGifts/Awards

EmployersEmployers can give 2can give 2 non-cash non-cash gifts gifts (for a (for a special personal occasion) special personal occasion) andand 2 non-cash 2 non-cash awards (in recognition of specific awards (in recognition of specific employment achievements) per year. employment achievements) per year.

The The costcost of the 2 gifts cannot be more than of the 2 gifts cannot be more than $500 in total. $500 in total.

The The costcost of the 2 awards cannot be more of the 2 awards cannot be more than $500 in total. than $500 in total.


Gifts and Awards Gifts and Awards cont.cont.

Example: employee receives:Example: employee receives: 1 birthday gift – cost $2001 birthday gift – cost $200 1 Christmas gift – cost $300 1 Christmas gift – cost $300 1 long service award – cost $4001 long service award – cost $400 1employee of the year award - $100 1employee of the year award - $100

The employee will not be in receipt of a taxable The employee will not be in receipt of a taxable benefit as the total cost does not exceed $500 for benefit as the total cost does not exceed $500 for the 2 gifts and $500 for the 2 awards .the 2 gifts and $500 for the 2 awards .



When the award or gift is taxable, the FMV When the award or gift is taxable, the FMV of the item (not the cost) is included in of the item (not the cost) is included in incomeincomeEX: the cost of the gift is $600EX: the cost of the gift is $600

the FMV is $700the FMV is $700

the FMV of $700 is included in income. the FMV of $700 is included in income. The $500 threshold is not an exemption.The $500 threshold is not an exemption.



If the cost goes beyond the $500 limit or the If the cost goes beyond the $500 limit or the number goes beyond 2 items, the number goes beyond 2 items, the assumption is that the gifts or awards form assumption is that the gifts or awards form part of the employee’s remuneration part of the employee’s remuneration package. package.


ExclusionsExclusions

The policy does not apply to gifts/awards that The policy does not apply to gifts/awards that are : are :

cash or near-cash (easily converted to cash) ;cash or near-cash (easily converted to cash) ;

points that can be redeemed for air travel or points that can be redeemed for air travel or other rewards;other rewards;

reimbursed by the employer; reimbursed by the employer;

not given by reason of employment; not given by reason of employment;

a form of disguised remuneration;a form of disguised remuneration;


Exclusions Exclusions cont.cont.

incentive rewards: team & moral building, incentive rewards: team & moral building, hospitality functions, etc:hospitality functions, etc:

prizes related to sales or other work performance.prizes related to sales or other work performance. giveaway contest in which a bonus is divided; giveaway contest in which a bonus is divided;

among the employees as prizes following a draw;among the employees as prizes following a draw; prizes won in a game of chance; andprizes won in a game of chance; and social events.social events.


Social EventsSocial Events

Not taxable:Not taxable: when they are available to all employees; when they are available to all employees;

and they cost $100 per person or less, plus and they cost $100 per person or less, plus reasonable ancillary costs. reasonable ancillary costs.


Employer Paid Education CostEmployer Paid Education Cost

Not taxable:Not taxable: Where the primary beneficiary of the Where the primary beneficiary of the

payment is the employer.payment is the employer. Employees are not entitled to claim the Employees are not entitled to claim the

non-refundable tuition credit nor the non-refundable tuition credit nor the education amount on their return for the education amount on their return for the non-taxable amount. non-taxable amount.



Guidelines:Guidelines: Specific employment-related trainingSpecific employment-related training: courses to : courses to

upgrade employment-related skills - not taxable.upgrade employment-related skills - not taxable. General employment-related trainingGeneral employment-related training: other : other

business-related courses not directly related to the business-related courses not directly related to the employer’s business if taken primarily for the employer’s business if taken primarily for the employer’s benefit - not taxable. employer’s benefit - not taxable.

Personal related courses:Personal related courses: not related to the not related to the employer’s business and are mainly the employer’s business and are mainly the employee’s benefit - taxable.employee’s benefit - taxable.



Taxable:Taxable: Tuition fees, books, supplies paid or Tuition fees, books, supplies paid or

reimbursed reimbursed for a related personfor a related person to the to the employee is taxable to the employee. employee is taxable to the employee.


Recreational Facilities and Club Recreational Facilities and Club DuesDues

Not taxable when the employer:Not taxable when the employer:

provides or pays for recreational facilities provides or pays for recreational facilities ANDAND it’s available to all employees; or it’s available to all employees; or

pays the club memberships AND it’s pays the club memberships AND it’s principallyprincipally for the employer’s advantage for the employer’s advantage rather than the employee’s.rather than the employee’s.


Meal AllowancesMeal Allowances

Not taxable:Not taxable:overtime meal allowances provided when:overtime meal allowances provided when:

an employee works three or more hours of an employee works three or more hours of overtime;overtime;

the amount is reasonable; the amount is reasonable; andandthe overtime is infrequent or occasional.the overtime is infrequent or occasional.


Convention/Conference Convention/Conference ExpensesExpenses

Not taxable when:Not taxable when:employees are required to attend the employees are required to attend the convention/conference as part of their duties; convention/conference as part of their duties; andandthe main purpose is for business. the main purpose is for business.

If the trip is extended to provide for a paid holiday, If the trip is extended to provide for a paid holiday, there is a taxable benefit equal to the cost borne by there is a taxable benefit equal to the cost borne by the employer for the extension.the employer for the extension.


Convention/Conference Convention/Conference Expenses Expenses cont cont

Spouse’s paid expenses are a benefit to the Spouse’s paid expenses are a benefit to the employee,employee, unless the spouse is there at the unless the spouse is there at the request of the employer and is mostly request of the employer and is mostly engaged in business.engaged in business.

There should be conclusive evidence of There should be conclusive evidence of this.this.

The benefit may be reduced accordingly.The benefit may be reduced accordingly.


Convention/Conference Convention/Conference Expenses Expenses contcont

Main purpose: business or social - identified Main purpose: business or social - identified and measured with some reasonableness.and measured with some reasonableness.

Factors to considerFactors to consider::

»duration;duration;

»time assigned to business programs; time assigned to business programs;

» time assigned to social events.time assigned to social events.


Romeril v. The QueenRomeril v. The Queen

Informal Procedure of the Tax Court of Informal Procedure of the Tax Court of Canada ( 97-3314(IT)I.Canada ( 97-3314(IT)I.

The court found that the spouse’s The court found that the spouse’s attendance was for business-related reasons attendance was for business-related reasons - principal purpose of trip was business. - principal purpose of trip was business.

Judgement is not treated as a precedent - Judgement is not treated as a precedent - does not apply to other taxpayers.does not apply to other taxpayers.

Case-by-case basis.Case-by-case basis.


Moving ExpensesMoving Expenses

Not taxable:Not taxable: Reimbursed moving expenses that are Reimbursed moving expenses that are

eligible deductions (s. 62 of the Act);eligible deductions (s. 62 of the Act); Non-accountable allowance up to $650 Non-accountable allowance up to $650

for incidental expenses; andfor incidental expenses; and Certain home relocation loans. Certain home relocation loans.


ParkingParking

Not taxable:Not taxable: When the FMV cannot be determined. When the FMV cannot be determined.

Examples:Examples: – A business operates from a shopping A business operates from a shopping

centre/industrial park where parking is centre/industrial park where parking is available to employees and non-employees. available to employees and non-employees.

– An employer provides “scramble parking”.An employer provides “scramble parking”. Provided to an employee who has a Provided to an employee who has a

disability.disability.


ParkingParking

Not taxable:Not taxable: When employees When employees regularlyregularly have to use have to use

their own vehicles to perform their duties.their own vehicles to perform their duties.Example of factors:Example of factors:

Number of days the automobile is required Number of days the automobile is required to be used for employment purposes.to be used for employment purposes.

Nature of the employment contract.Nature of the employment contract. Who the primary beneficiary is.Who the primary beneficiary is.


ParkingParking

Primary beneficiary:Primary beneficiary: Is it a benefit to the employer rather than Is it a benefit to the employer rather than

the employee? the employee? Does the benefit restore the employee to the Does the benefit restore the employee to the

economic situation they would have been in economic situation they would have been in if they were not engaged in business on if they were not engaged in business on their employer’s behalf?their employer’s behalf?


Paid Professional MembershipPaid Professional Membership

Not taxable:Not taxable: When an employer pays professional When an employer pays professional

membership fees because of the condition membership fees because of the condition of employment.of employment.

When the employer is the primary When the employer is the primary beneficiary of the payment.beneficiary of the payment.


Internet/Cell Internet/Cell Phones/ComputersPhones/Computers

Personal use of any equipment, services etc Personal use of any equipment, services etc is a taxable benefit.is a taxable benefit.

Not a benefit if the primary beneficiary is Not a benefit if the primary beneficiary is the employer or if the program is consistent the employer or if the program is consistent with the guidelines in the Income Tax with the guidelines in the Income Tax Technical News no. 13 on employment-Technical News no. 13 on employment-related training. related training.


ReimbursementsReimbursements

Reimbursements may not be taxable if they Reimbursements may not be taxable if they are for:are for:

reasonable out-of pocket employment-reasonable out-of pocket employment-related expenses supported by vouchers; orrelated expenses supported by vouchers; or

travel expenses or reasonable travel travel expenses or reasonable travel allowances when the employee is traveling allowances when the employee is traveling away from the municipality for work. away from the municipality for work.


Other Non Taxable BenefitsOther Non Taxable Benefits

Certain employer provided child care Certain employer provided child care expenses.expenses.

Employer’s contribution to a Private Health Employer’s contribution to a Private Health Service Plan.Service Plan.

Employer provided distinctive uniform or Employer provided distinctive uniform or special protective clothing.special protective clothing.


Trust Account’s Web AddressTrust Account’s Web Address

The address to the payroll page is:The address to the payroll page is:

http://www.ccra-

adrc.gc.ca/tax/business/topics/payroll/menu-e.html

The address to payroll guides and forms is:The address to payroll guides and forms is:

http://www.ccra-

adrc.gc.ca/tax/formspubs/menu-e.html


ReferencesReferences

Employers’ Guide Employers’ Guide Taxable BenefitsTaxable Benefits -T4130 -T4130 Employers’ Guide Employers’ Guide Payroll Deductions (Basic Payroll Deductions (Basic

Information)Information) -T4001 -T4001 IT-470 IT-470 Employees’ Fringe BenefitsEmployees’ Fringe Benefits (Consolidated) (Consolidated) IT-63R5 IT-63R5 Benefits, Including Standby Charge for Benefits, Including Standby Charge for

an Automobile, from the Personal Use of a Motor an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer after 1992Vehicle Supplied by an Employer after 1992

IT-522R IT-522R Vehicle, Travel and Sales Expenses of Vehicle, Travel and Sales Expenses of EmployeesEmployees


ReferencesReferences

IT-91R4 IT-91R4 Employment at Special Work Sites or Employment at Special Work Sites or Remote Work LocationsRemote Work LocationsIT-148R3 IT-148R3 Recreational Properties and Club DuesRecreational Properties and Club Dues IT-131R2 IT-131R2 Convention ExpensesConvention Expenses IT-178R3 IT-178R3 Moving ExpensesMoving ExpensesIT-75R3 IT-75R3 Scholarships, fellowships, bursaries, Scholarships, fellowships, bursaries, prizes, and research grants prizes, and research grants Various Income Tax Technical NewsVarious Income Tax Technical News


THANK YOUTHANK YOU

cpp/ei and trust accounts division headquarters vicky adams lorraine maisonneuve caubo saskatoon -...

Documents