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The Canada revenue Agency warns businesses



23 April 2019 11:30

Photo : Freepik

TheCanada revenue Agency (CRA) is asking Canadians to pay attention to tax schemes fraud involving accounts management-health.

The ARC said to have noticed that many companies require ” undue deductions related to accounts management-health while some are against the Law of income tax. Some taxpayers will reflect deductions for a important or tax-free income, says the agency.

An interesting way to provide medical care

Accounts management-health are health insurance plans self-directed and established by employers for their employees residing in Canada. It is a way for companies to offer benefits of medical and dental not taxable to their employees. “The account management-health seems to be an extremely interesting and cost-effective to obtain and provide benefits for medical care and dental care,” said ARC.

However, a health spending account valid must conform to the rules of a private health services plan, recalls the agency.

The CRA maintains that the incorporated firms may participate in a health spending account, as well as the businesses that rely on a single employee. However, this account cannot be restricted to shareholders only unless they receive a taxable income.

In the case of unincorporated businesses or sole proprietors, the owner and their employees are also eligible if they have at least an arm’s-length employee.

Problem of marketing by the brokers

According to ARC, the problem comes from the fact that some brokers and financial planners sell accounts management-health from businesses operating as sole proprietorships that do not have arm’s length employees. The participants are informed that they will adhere to the rules of the Law of income tax applicable to the plans of private health services if they subscribe to other types of insurance.

However, if the business is a sole proprietorship that does not deal at arm’s length, the CRA does not consider the health spending account as a private plan of health services and the costs incurred for the amounts paid on this account are not deductible business expenses.

In case of confusion, the CRA encourages Canadians to seek a second independent opinion from a tax professional known on issues important fiscal.

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