2021-0877921E5 Compensation paid for clinical research studies

Principal Issues: 1. Whether compensation paid for clinical research studies is taxable income. 2. Whether the payer is required to issue a tax slip to the participant. 3. Whether the filing requirement can be waived for the payer.

Position: Yes. Yes. No.

Reasons: Consistent with prior published positions.

Author: Leung, Brenna
Section: 3, 5(1), 9(1), 153(1), 237(1.1), 237(2), Regulation 200(1)

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                                                                                            B. Leung
                                                                                            2021-087792

July 27, 2021

Dear XXXXXXXXXX:

Re: Amounts paid to participants for clinical research studies

We are writing in reply to your correspondence dated January 12, 2021, wherein you asked whether monetary compensation provided to participants in clinical research studies is taxable. You also asked about the reporting requirements for the compensation and whether those requirements can be waived.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (“Act”) and related legislation (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 a particular transaction 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 70-6R11, Advance Income Tax Rulings and Technical Interpretations.

Section 3 of the Act requires a taxpayer to include in income all amounts from a source that is an office, employment, business, property, or other enumerated source (generally covered in Part I, Division B, Subdivision d of the Act).

You state that each participant will be provided with a predetermined amount of monetary compensation, solely for their involvement and participation in the clinical research studies. It is our general view that monetary compensation provided to participants in clinical research studies is an amount paid for services rendered by participants and is not a windfall, donation, or the payment of damages for injury or death. Generally, compensation provided for services rendered will be taxable as either employment income or business income, depending on the particular circumstances.

Where an employment relationship exists between the participant and the organization, the compensation received by the participant would generally be taxable pursuant to section 5 or 6 of the Act. Further, subsection 200(1) of the Income Tax Regulations (“Regulations”) requires the payer file a T4 slip, Statement of Remuneration Paid, in respect of the compensation. For purposes of the Act, the determination of whether the relationship between parties is that of employer/employee or an independent contractor is a question of fact. For further information, refer to Guide RC4110, Employee or Self-employed?.

Where no employment relationship exists, compensation received for services rendered to another party would generally constitute business income for purposes of the Act. In this case, subsection 200(1) of the Regulations requires the payer to file a T4A slip, Statement of Pension, Retirement, Annuity, and Other Income, in respect of the compensation.

The requirement to file a T4 or T4A slip cannot be waived under the Act. However, the CRA has an administrative position that generally waives T4A filing requirement if the payment is $500 or less and no income tax was deducted from the payment. For more information on the payer’s responsibility for issuing T4A slips, refer to Guide RC4157, Deducting Income Tax on Pension and Other Income, and Filing the T4A Slip and Summary.

We trust these comments will be of assistance to you.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate

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