Positive outcome for dealers on GST/HST insurance fight
January 21, 2019
The Canada Revenue Agency (CRA) will not be appealing an important tax case for dealers to the Federal Court of Appeal in relation to the GST/HST on insurance, which means dealers can continue to treat insurance commissions as GST/HST-exempt moving forward. The favourable dealer ruling came down from the Tax Court of Canada on November 15, 2018 and the CRA had until December 17, 2018 to file an appeal.
The conclusion of the legal case closes a file that involved not only a partnership of CADA, TADA, and their provincial dealer association colleagues, but also concerted advocacy efforts from its government relations and legal departments in support of a resolution to an issue affecting dealers across the country.
“The original case supported by CADA was Applewood Holdings Inc., an Ontario dealer in the Humberview Group,” said Tim Ryan, Vice President and Director Industry Relations & General Counsel at CADA. “In September 2017, our Legal Action Committee reviewed an application from the dealer, who had filed a notice of appeal for the tax assessment (GST/HST under the Excise Tax Act) it received from the CRA.”
Ryan says the dealer received the assessment for fees received for assisting its customers in obtaining insurance for their vehicle lease or purchase. “The legal question in the case was whether the services provided by the dealer in connection with the insurance constitutes a ‘taxable supply’, with the result that GST/HST must be charged by the dealer on the cost of the service – or whether it was a ‘financial service’, in which case the GST/HST did not apply,” said Ryan.
At that time, the CADA Legal Action Committee heard not only from Applewood’s tax lawyers (Thorsteinssons LLP), but also from CADA’s Huw Williams. He outlined the extensive advocacy efforts his government relations staff had undertaken on this issue similar to its successful GST/HST efforts on finance income in 2015. However, at a certain point in his efforts it became clear to Williams that this insurance file was going to require a legal solution as opposed to a government relations one, and that an application to the CADA Legal Action Committee was the best next step. CADA’s Legal Action Committee concurred and recognizing the importance of the case to dealers across the country and supported Applewood’s application. The Legal Action Committee granted up to $300,000 in support from the Legal Action Fund.
In addition to the Applewood assessment, dealers from across the country also filed notices of appeal to the Tax Court of Canada for their individual assessments. CADA arranged for Thorsteinssons LLP to assist these member dealers with the filing of their notices of appeal for their assessments for GST/HST on insurance commissions received.
The case was heard by the Tax Court of Canada last year and a judgement was rendered in November. The court agreed that the insurance commissions were GST/HST-exempt and al-lowed Applewood’s appeal. The recent decision not to appeal the Tax Court decision to the Federal Court of Appeal, should trigger the process for CRA to begin to process the affected files to reverse the assessments — which means dealers should expect to receive their adjustments in due course.
“CADA is pleased with the outcome of the court case and grateful for the efforts of all those who participated in this long process,” said CADA President & CEO John White.
Dealers with questions can consult CADA's website or contact Huw Williams in CADA’s Ottawa office at email@example.com or 1-800-465-3054.