Revenue Canada Taxation Head Office
XXXX
R.B. Day (613) 957-2136
October 8, 1987
Re: Private Health Services Plan and Eligible Medical Expenses
We are writing in reply to your letter of August 12, 1987, wherein you requested our views as to whether or not the addition of certain expense items to a Private Health Services Plan ("PHSP") as defined in paragraph l10(8)(a) of the Income Tax Act (the "Act") would be considered as eligible medical expenses otherwise deductible under paragraph 110(l)(c) of the Act.
As we understand it a corporation is considering adding the following two categories of expense to an existing PHSP.
(1) Personal Blood Bank
"Expenses incurred by or on behalf of a covered employee for the establishment and maintenance of a personal blood bank at a medical institution or clinic approved by the administrator of the Plan".
(2) Wigs
"Expenses incurred by or on behalf of a covered employee for the purchase of a wig where the loss of hair is a direct result of a medical treatment as certified by a medical practitioner."
It is your view that the Personal Blood Bank would not jeopardize the PHSP and would qualify as a medical expense under paragraph 110(1)(c) of the Act by virtue of the comments in paragraph 42 of IT-225R . In the context of the epidemiological environment, it is also your view that the cost of a personal blood bank will assist in the treatment of an eventual injury or illness of the taxpayer.
You are uncertain about the legislative basis for the allowance of the expenditures for wigs.
In order for the Personal Blood Bank to qualify as a medical expense it must fulfil the requirements set out in subparagraph 110(l)(c)(xiv) of the Act. This subparagraph allows expenses "for laboratory, radiological or other diagnostic procedures or services together with necessary interpretations, for maintaining health, preventing disease or assisting in the diagnosis or treatment of any injury, illness or disability, for the taxpayer, his spouse or any such dependent as prescribed by such a medical practitioner or dentist".
Since the Personal Blood Bank appears to be set up as a contingent medical expense item rather than a medical expense incurred in connection with an active treatment or preventative treatment measure, as envisioned by this subparagraph, it is our view that these expenses would not qualify as a medical expense. As a consequence the inclusion of this item in the PHSP could, in our view, jeopardize the PHSP.
With respect to the expense item for wigs, subparagraph 110(l)(c)(xii) of the Act states that expenses "for any device or equipment, not described in any other subparagraph of this paragraph, of a prescribed kind, for use by the taxpayer, his spouse or any such dependent as prescribed by such a medical practitioner", would qualify as a medical expense. Paragraph 5700(a) of the Income Tax Regulations (the "Regulations" states that "For the purposes of subparagraph 110(l)(c)(xii) of the Act, a device or equipment is hereby prescribed if it is a
(a) wig made to order for an individual who has suffered abnormal hair loss owing to disease, medical treatment or accident."
Assuming that the PHSP is amended so that the expenditures for wigs fulfil all of the requirements of subparagraph 110(l)(c)(xii) of the Act and paragraph 5700(a) of the Regulations, it is our opinion that the addition of such an expense item to the PHSP could not jeopardize the PRSP.
We would caution that the above comments are based on the limited information set out in your letter, and as such, are not binding upon this Department.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch