Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Parents, who have a handicapped child, can obtain respite care for the child. The respite care is approved by the B.C. Government which provides the necessary funding to an association which locates caregivers and pays them on the basis of the number of hours approved by the B.C. Government. Where the shift of a caregiver does not exceed 12 hours, the caregiver is paid at the rate of $7.50 per hour. Where the shift is from 12 ot 24 hours, the caregiver receives the flat rate of $90. What is the tax treatment of the payments in the hands of the caregiver?
Position: Generally, the payments would be taxable as business income.
Reasons: The position is consistent the comments in paragraph 4 of IT-504R2 on reasonable expectation of profit.
June 15, 2000
Vancouver Tax Services Office HEADQUARTERS Nelson Toy M. Eisner CPP/EI Rulings (613) 957-2138
2000-002467
Respite Care for Disabled Children
This is in reply to your facsimile received on December 24, 1999, concerning the above noted subject. We acknowledge your two subsequent submissions made to us concerning the respite care program and amounts paid for respite care, and our telephone conversation (Eisner/Toy).
In the situation, handicapped children live with their parents. However, from time to time, the parents of a handicapped child can obtain respite care for their child. Any respite care that is provided to the parents of a child with funding from the B.C. Government is approved by the Ministry For Children and Families (the "Ministry"). When respite care has been approved for handicapped children within a certain area, the Ministry contacts the XXXXXXXXXX (the "Association"). The Association has a list of qualified caregivers or, if necessary, advertises for caregivers. The Association matches the caregiver with various children who qualify for the funded respite care. Respite care is provided on the basis of the number of hours approved by the Ministry. Funds for the payment of care is provided to the Association by the Ministry.
Approvals for respite care range from 1/2 a day to a full week. In some cases, the care is provided by a caregiver in the home of the caregiver, while in other cases the care is provided by the caregiver at the residence where the child lives. Where a shift is less than 12 hours, the caregiver is paid at the rate of $7.50 per hour. Where the shift is from 12 to 24 hours, the caregiver receives a flat rate of $90.
The Association does not issue information slips with respect to amounts paid to the caregivers as the payments are considered to be non-taxable.
You have asked us for our views on the tax treatment of the respite care payments. In connection with your request, we note that your office is satisfied that the caregivers are independent contractors rather than employees.
The main concern is whether a handicapped child could be considered to be someone who "resides in the taxpayer's residence" (i.e., the residence of the caregiver) for the purposes of subparagraph 81(1)(h)(ii) of the Income Tax Act (the "Act") where the caregiver provides respite care to the handicapped child for a period of time, as noted above, and the child sleeps at the caregiver's residence during that time period.
Our Comments
Since the requirement in subparagraph 81(1)(h)(ii) of the Act refers to the place where the cared for individual resides, (i.e., lives or dwells), it is our view that this requirement would not be satisfied with the result that the related payments would not be exempt under paragraph 81(1)(h) of the Act.
With respect to the tax treatment of payments made to the caregivers, it our general view that any undertaking or activity of a taxpayer that results in a profit or has a reasonable prospect of profit would be viewed as the carrying on of a business. On the other hand, where the activity or undertaking has no reasonable expectation of producing a profit, a business would not be considered to have been carried on and any losses that resulted would not be deductible for income tax purposes. On the basis of the information provided to us, it is our view that the payments should be treated as business income for the purposes of the Act. These comments are consistent with the Agency's position in paragraph 4 of IT-504R2 "Visual Artists and Writers" on reasonable expectation of profit.
It follows that, in such circumstances, the payments could not be included in income under paragraph 56(1)(u) of the Act, which refers to certain social assistance payments, with an offsetting deduction under subparagraph 110(1)(f)(iii) of the Act, because paragraph 56(1)(u) of the Act specifically excludes social assistance payments which are otherwise required to be included in income.
If you require further technical assistance, we would be pleased to provide our views.
For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the legislation Access Database (LAD) on the Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613) 957-0682. The severed copy will be sent to you for delivery to the client.
John Oulton
Section Chief
Business, Property & Employment Section III
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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