2015-0601671E5 T4A reporting for services provided

Principal Issues: Whether the value of a service provided to an individual must be included in the individual’s income, and reported on a T4A slip.

Position: It is a question of fact.

Reasons: See response.

Author: McCarthy, Kathryn
Section: 56(1)(r); Regulation 200(2)(c)

XXXXXXXXXX                            2015-060167
                                K. McCarthy

December 23, 2015

Dear XXXXXXXXXX:

Re: Requirement to report the value of services provided on a T4A 

We are writing in response to your email of July 28, 2015, and our conversations of December 3 and 10, 2015 (McCarthy/XXXXXXXXXX). We also acknowledge the receipt of additional information by email on December 16, 2015. You asked whether the value of a service provided to an individual must be included in the individual’s income and reported on a T4A slip, Statement of Pension, Retirement, Annuity, and Other Income.

In the situation you described:

*    a service provider enters into a contract with a province, to provide employment services to unemployed individuals;

*    the services will assist the individuals to become ready for employment, or start a business;

*    the services are provided directly by the service provider or indirectly through a subcontractor; and

*    the funding from the province is based on the number of employees the service provider has allocated to provide the services and specific services provided directly or indirectly by the service provider to unemployed individuals.

The services that you have asked about are as follows:

*    assessing disability-related employment needs (for example, determining whether disability aids or devices are required);

*    personal counselling (for example, providing violence or abuse counselling on the psychological impact of violence, that interferes with achieving sustained employment);

*    employment support services (for example, help with searching for a job);

*    placement support services (for example, providing unpaid work experience); and

*    self-employment orientation and assessment (for example, help with business development concepts).

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (“Act”), where referenced. 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.

Paragraph 56(1)(r) of the Act generally requires that certain financial assistance amounts received by an individual in the year are included in the individual’s income. Financial assistance paid to an individual, or paid to a third party for the benefit of an individual, is included in income under subparagraph 56(1)(r)(iii) of the Act if the assistance is provided under certain programs. In particular, a program that is:

(A)    established by a government or government agency in Canada or by an organization; 

(B)    similar to a program established under Part II of the Employment Insurance Act (“EI Act”); and 

(C)    the subject of an agreement between the government, government agency or organization and the Canada Employment Insurance Commission because of section 63 of the EI Act.

Indirect payments include services, where those services have been paid for on behalf of a specific individual. You have stated that in some cases, the funding from the province can be attributed to a specific individual receiving the unemployment services. Where the funding for a service provided is directly attributable to a specific individual, the value of the service is considered indirect financial assistance received by the individual. Therefore, the value of the service is included in the individual’s income under subparagraph 56(1)(r)(iii) of the Act where the program meets each requirement described in (A) – (C) above. Where the funding for a service provided is not directly attributable to a specific individual, the value of the service is not considered financial assistance received by the individual and is not required to be included in income under paragraph 56(1)(r).

Paragraph 200(2)(c) of the Income Tax Regulations requires payments made or benefits conferred on an individual, that are taxable under paragraph 56(1)(r) of the Act, be reported on a T4A. Therefore, where the value of a service is required to be included in an individual’s income under paragraph 56(1)(r), the service provider is required to report this amount on a T4A slip. 

We trust these comments will be of assistance to you.

Yours truly, 

Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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