July 24, 2017 by Rosa Maria Iuliano

HST challenges physicians face

Many doctors work their entire career without needing to collect HST for their services, but there can be many exceptions to this rule. For a medical service to be exempt from HST, (a) it must be rendered to a particular individual, (b) the doctor must be licensed under the laws of the province to practise the profession of medicine (or dentistry), (c) it must be a consultative, diagnostic or other health care service that is a qualifying health care supply and (d) it must not be a cosmetic service supply, nor a supply in respect of a cosmetic service supply not meant for medical or reconstructive purposes. Doctors doing work outside these paramaters should keep the following HST rules in mind.

The $30,000 threshold

HST only needs to be paid when the relevant income for the year exceeds $30,000. If your HST type income is over $30,000 and you don’t collect the HST in a province like Ontario – where the HST rate is 13 per cent – you can quickly accumulate a large obligation. Once you’re in that position, it is very difficult to go back to the people who paid you and ask them for an additional 13 per cent. Some doctors cross this threshold without realizing it because they are collecting numerous small payments, so it’s important that you carefully track all collected payments that may eventually qualify for HST.

What kind of work qualifies?

Any doctor who works in a teaching or research environment may be required to collect HST for their work. If you are being paid to complete a legal report for an insurance company, you are rendering that service to a third party, not an individual. As a result, that work could lead to HST requirements. As well, there may be HST implications when physicians take on an administrative position. For instance, if they are being paid to act as a dean or a chair — any role that provides administrative, rather than medical services – that work could be captured by these rules.

On-call services

For doctors who offer more traditional medical services related to treating patients, HST is rarely a concern. However, on-call doctors are often paid to make themselves available during a particular period of time, rather than for the treatment of specific patients. According to a January 2016 ruling from CRA, these hospital on-call fees may be an HST taxable supply. Since payment is coming from the hospital, many doctors mistakenly believe that they are HST exempt when they may not be. However, there is still some uncertainty about this new development, as the CRA acknowledges that, in cases where these fees are reimbursed by the government under a plan established to provide health care services to all insured persons of the province, the supply of services might be exempt from HST. With that in mind, the OMA is currently challenging the CRA’s ruling.  Physicians should assess their risk on a case-by-case basis.

Partial exemptions

Much of the work physicians do is only partially exempt from HST. For example, if a physician is testing a new drug or protocol, a lot of the research includes their patients. They must then determine how much of the time spent with the patient is related to care and how much is research. At times, they may be fulfilling both roles simultaneously. Similarly, if you are a doctor in a teaching hospital, you’re compensated for instructing medical students and interns, but you are also treating real patients in the process. Unfortunately, both teaching and research do not qualify as a “consultative, diagnostic or other health care service.” Care must be taken to determine if the physician’s work is subject to the HST, as it is the physician who ultimately has to remit the tax to the CRA (whether they collect the funds or not).

Rosa Maria Iuliano, M.Acc., CPA, CA, is a partner at Collins Barrow Ottawa LLP. She specializes in providing income tax, commodity tax and financial planning advice to proprietorships, partnerships and owner-managed corporations, as well as not-for-profit organizations.

Information is current to July 17, 2017. The information contained in this blog is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

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Rosa Maria Iuliano Rosa Maria Iuliano
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