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GST — employee rebate more than 10 years back

The GST employee rebate is an unusual rebate that is claimed on the income tax return and administered through the income tax system.

My client was a salesman who worked as an employee of a company. His wife helped him with his work and billed him as an independent contractor. After about 15 years the CRA noticed that she had been billing him more than $30,000 per year, and assessed her for not collecting and remitting GST on these bills. The amount was substantial.

The client came to me and I advised that the GST did indeed apply, but that we could try to get him an offsetting reduction by having his wife bill him for all the GST for the 15 years. If he had been an independent contractor he could have claimed input tax credits for the GST, but he was not; he was an employee.

I applied to the CRA for Taxpayer Relief in allowing my client to claim the GST employee rebate on his past years' income tax returns. The CRA agreed and allowed the rebate, but only for the past 10 years. The person processing the file thought that the "10 year rule" applied, limiting Taxpayer Relief claims to the past 10 years.

I wrote a detailed letter explaining that the "10 year rule" did not apply in this situation. Even though the rebate was processed through the income tax system, it was a GST rebate, and this particular rebate permitted the CRA to accept a late claim, with no 10-year limitation.

The CRA official disagreed and wrote back to me. I knew that her interpretation of the legislation was wrong. I escalated the matter and wrote back, explaining exactly why my interpretation was correct and asking the official to refer the matter for a ruling.

The official referred the matter to CRA's GST/HST Rulings section, who agreed with my analysis. The rebate was allowed for the full 15 years, and my client received a refund cheque.

Problem solved!

(2010)