Principal Issues: Do medical legal reports and other reports created for the purpose of litigation qualify as medical services under paragraph 118.2(2)(a) of the Income Tax Act for the purposes of the medical expense credit.
Position: Question of fact.
Reasons: In order to qualify as a medical service the service must be performed by a medical practitioner.
2006-021813 XXXXXXXXXX Shelley Lewis (613) 941-7239 April 23, 2007
Dear XXXXXXXXXX:
Re: Medical Expenses - Independent Medical Examinations
We are responding to your email dated December 18, 2006, wherein you inquired whether medical legal reports and other reports created for the purpose of the litigation of an insurance claim qualify as medical services under paragraph 118.2(2)(a) of the Income Tax Act for the purposes of the medical expense credit.
You were in litigation for a long-term disability insurance claim and in 2006 had to pay for several assessments and reports by medical practitioners in British Columbia for the purposes of the litigation. You are concerned whether the following amounts can be claimed as medical expenses under the Act:
(a) a doctor's physical examination of a patient and related medical legal report that discusses the patient's employability;
(b) an occupational therapist physical capacity evaluation of a patient and related report that discusses the patient's physical strengths and employment limitations;
(c) a physiotherapist's physical examination of a patient and related report which outlines the patient's physical condition and employability; and
(d) a psychologist assessment and report in respect of a patient's employability.
Our Comments
The situation outlined in your letter appears to relate to a factual one. It is not this Directorate's practice to comment on proposed transactions than in the form of an advanced income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, "Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
Under paragraph 118.2(2)(a) of the Income Tax Act, there are two main criteria that must be met for an expense to qualify as a medical expense:
- the amount paid must be paid to a medical practitioner, dentist or nurse or public or licensed private hospital; and
- the amount must be in respect of medical or dental services.
Subsection 118.4(2) of the Income Tax Act states that a reference to the term "medical practitioner" or "doctor" inter alia, is a reference to a person authorized to practise as such, in the case where the reference is used in respect of a service rendered to a taxpayer, pursuant to the laws in the jurisdiction where the service is rendered. The Health Professions Act, R.S.B.C. 1996, c. 183, regulates, inter alia, physical therapists, occupational therapists, and psychologists in British Columbia. Regulations to the Health Professions Act indicate the aforementioned titles may only be used in British Columbia by those who have been licensed under the appropriate regulatory body in British Columbia If any of the above-mentioned individuals who perform services for a patient were licensed under the aforementioned legislation, those individuals would qualify as a "medical practitioner" for purposes of the Income Tax Act.
In respect of the second criterion, it has generally been the Agency's position that services provided by a medical practitioner are medical services. However, it should be noted that in the case of litigation, often the plaintiff is entitled to be reimbursed for expert reports through costs or as terms of the settlement. If such entitlement exists, pursuant to paragraph 118.2(3) of the Income Tax Act, the amount will not be considered a medical expense unless the amount of the reimbursement is required to be included in computing income and is not deductible in computing taxable income.
We trust these comments are of assistance.
Gwen Moore
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch