2014-0540731E5 Medical Tax Credit- Block Fees

Principal Issues: 1. Do block fees qualify for the METC?

Position: 1. Block fees could qualify if the required conditions are met.

Reasons: 1. The block fees must be in respect of medical services to a medical practitioner.

Author: Dubis, Robert
Section: 118.2(2)(a); 118.2(2.1); 118.2(3)

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                                                                                                                                                             2014-054073
                                                                                                                                                             Robert Dubis

November 28, 2014

Dear XXXXXXXXXX:

We are replying to the correspondence you sent on May 8, 2014, to the Shawinigan tax centre and which was forwarded to us for reply. As a representative of a health and dental claims insurer, you asked if an amount paid for an “executive assessment” meets the eligibility requirements of the medical expense tax credit (“METC”) for the purpose of determining whether any reimbursement may be made to an individual pursuant to the terms of a plan of insurance. 

This technical interpretation provides general comments about the provisions of the Income Tax Act (the “Act”) and related legislation.  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

The Canada Revenue Agency’s (CRA) general views regarding the METC can be found in Income Tax Folio S1-F1-C1, Medical Expense Tax Credit available at www.cra-arc.gc.ca.

Based on our review of the documentation submitted with your query, the amount paid appears to be a “block fee” to a medical clinic for a variety of services, the primary one of which is a comprehensive health and lifestyle assessment. The documentation notes that the services provided are generally not covered by the Ontario Health Insurance Plan, however, when a patient requires services covered by OHIP, then the provincial plan is billed accordingly. 

The fact that a payment for otherwise eligible medical expenses is made in the form of a block fee would not disqualify the payment for the purpose of the METC. As noted in paragraph 1.29 of folio S1-F1-C1, “an amount paid to a medical clinic that can reasonably be considered a prepayment of services that are to be provided over the course of the year and are actually provided in that year (block fees) will generally be an eligible medical expense.” 

A block fee is an eligible medical expense for the purpose of the METC only to the extent that it is paid for eligible medical expenses as described in subsection 118.2(2) of the Act. Paragraph 118.2(2)(a) of the Act allows an amount paid to a medical practitioner, dentist, nurse or licensed hospital in respect of medical services or dental services.

Subsection 118.4(2) of the Act states that a reference to a “medical practitioner” is a reference to a person who is authorized to practice as such pursuant to the laws of the jurisdiction in which the service is rendered.  Thus, a medical doctor is a medical practitioner. A list of authorized medical practitioners by province or territory for the purpose of claiming the METC can be found at www.cra.gc.ca/medical. As explained in paragraph 1.28 of folio S1-F1-C1, payments made to a corporation, partnership, society or association for any medical services rendered by their employees or partners are eligible only where the person providing the medical services is a medical practitioner.

A list of staff on the medical clinic’s website indicates all those listed, with the exception of one individual, would qualify as authorized medical practitioners in the province of Ontario for the purpose of subsection 118.4(2) of the Act. Services provided by the person listed as a personal trainer would not qualify for the METC.

Paragraph 1.26 of folio S1-F1-C1 explains that “medical services” are diagnostic, therapeutic or rehabilitative services that are performed by a medical practitioner acting within the scope of his or her profession. While it appears that some portion of the services covered by the block fee will be provided either directly by, or under the general care of a doctor, it does not appear that all components of the services would qualify as medical services or other medical expenses. For example, the supply of a first aid kit would not likely qualify as a medical expense for the purposes of the METC.

Whether a particular service meets the required conditions is a question of fact. Where the block fee includes services which do not meet the required conditions, that portion of the block fee would not qualify for the METC.

Limitation – Cosmetic services

Although you have not indicated that services are provided for cosmetic purposes, we would like to note that cosmetic services are subject to additional limitations under the Act. Subsection 118.2(2.1) of the Act specifically excludes amounts paid for medical or dental services which are provided purely for cosmetic purposes, unless they are necessary for medical or reconstructive purposes. Where the block fee includes cosmetic services which are not necessary for medical or reconstructive purposes, that portion of the block fee would not qualify for the METC.

Reimbursements

As noted in paragraph 1.16 of folio S1-F1-C1, qualifying medical expenses of an individual do not include any expense for which the individual has been reimbursed except to the extent that the amount is required to be included in income.

We trust our comments will be of assistance.

Yours truly,

Pamela Burnley, CPA, CA
Tax Credits and Ministerial Issues
Business and Employment Division
Income Tax Rulings Directorate

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