Category: Healthcare & Other Professionals

Professional Development and Continuing Education Expenses – Deductible or Not?

Posted on by Edixon

One of the key traits of a professional is a desire and need for regular professional development and continuing education.  This training can involve some travel expenses as the courses are often centralized and even occasionally located somewhere that allows the professional to enjoy a vacation in the process.  The resulting cost can be somewhat significant and while much of it may seem to relate to the training course, the full amount may not always be eligible as a tax deductible expense. 

In general, costs that are personal in nature are not deductible for tax purposes and should be tracked separately from those which relate to the professional’s actual training costs.  In addition, the Canada Revenue Agency (CRA) does not allow the deduction of expenses that are not considered reasonable.  Here are some guidelines to consider when planning to incur these expenses.

Expense vs. Capital

There are different reasons a professional might take a training course.  If a course is being taken to provide the professional with a new skill or qualification, it would be considered a capital item and is not eligible to be deducted as a current expense.  However, courses taken to maintain, update or upgrade an already existing skill or qualification may be eligible for a deduction.

Costs of Training

The CRA does allow for the deduction of more than just the specific course itself.  Accommodations, travel (including flights, taxis, etc.), and 50% of meals can also be deducted, provided they are incurred during the actual days of training or are on the days of arrival and departure.  This would also include reasonable costs incurred on the weekend that might fall in the middle of multiple weeks of training, and where it is not feasible to return home during that time.  Any costs incurred on non-training days would not be eligible for a tax deduction.

Location

Continuing education and training courses are often in locations that are also popular vacation spots.  However, costs for a course taken at a distant location or at a location outside the territorial limits of the professional organization would be considered unreasonable by the CRA if that same course was offered locally at a smaller cost.  Additionally, if the course taken in a recognized holiday area was for a short duration compared to the length of a personal holiday taken during the same trip, a portion of the costs incurred will also be considered non-deductible.

Duration

Full-time training courses generally do not exceed a period of two or three weeks.  Those that are longer may still be allowable as a deductible expense, provided the course is sponsored or accepted by the professional association to maintain the professional standards of its members.  It should be noted, however, that the total time taken in attending courses in any one year should not be so great that it affects the professional’s ability to carry on his or her business or profession for a significant part of the year.

Attendees

Only costs for the actual attendees of the training course may be deducted for tax purposes.  All expenses incurred by accompanying spouses or children would be personal and therefore not deductible.

Training vs. Convention

It should be noted that the CRA distinguishes a training course from a convention, which is described as a formal meeting of members of an organization or association for professional or business purposes.  Typically there is no formal training at a convention, although learning may occur through various interactions and seminars.  The previously mentioned deductibility guidelines are only applicable for training courses. 

GST/HST Implications on Associate Agreements

Posted on by Edixon

Associates are a key part of the healthcare industry as a large majority of practitioners either are one or have hired one throughout their careers.  It can be a way for someone to gain experience as they start their career or a viable way to mitigate some of the hard costs that go along with running a practice.  As part of this process, practitioners and their associates arrange some form of fee-sharing arrangement with each other to account for the fact that the associate typically must directly bill and collect their OHIP revenues, but also has use of the main practitioner’s office space in order to generate those revenues.  While this arrangement may be somewhat formal in the eyes of the practitioner and associate, it is commonly a verbal agreement and therefore can create some complications, especially when it comes to GST/HST (“HST”) rules.

The applicability of HST on associate fees has been a bit of a hot topic with the Canada Revenue Agency (CRA) in recent years.  They have been looking more closely at these associate arrangements and have reassessed and charged HST to a number of health care providers (particularly optometrists).

The starting assumption made by most involved in these fee-sharing arrangements is frequently that since the healthcare services provided to the patients by the associate are HST exempt, the revenues from these services that are transferred in either direction under the associate agreement would also be considered HST exempt.

However, it needs to be considered what the associate is actually paying the main practitioner for and what kind of support exists for that.  The CRA has taken the position in a number of instances that these associate fee payments are effectively rent/admin type fees that the main practitioner is charging the associate for use of the clinic space and therefore there is to be HST charged on this amount, as that is a taxable supply.  The CRA has said that only if there is a bona fide arrangement between the two parties that shows this is simply a fee-sharing arrangement, then HST can be avoided. 

As we have found, many health care professionals do not have adequate associate agreements in place to support the “fee sharing” position and avoid potential HST reassessments by the CRA.  In this situation, the more conservative approach is to charge the HST and then have the payor register for HST to at least recover a portion of this cost. 

To avoid these difficulties, health care practitioners should consider looking at the associate agreements that they have in place to determine if changes should be made.  Qualities of a valid bona fide arrangement are that it:

  • Is a written document signed by both parties involved and is not just verbal;
  • Clearly states that the arrangement is an apportionment of the fee for the health care service provided to the individual patient;
  • Should not refer to any of the fee sharing amounts as payment for use of facilities by the associate;

Lastly, many associate agreements have slightly different terms, depending on the situation.  This could include the agreed-upon percentage of fees to share, further revenues to be shared in addition to the healthcare billings, which party is making the payments, and how frequently the payments are being made.  Most of these differences will not have an effect on the HST obligations, but care should be taken to examine all revenue sources included in the agreement as certain types may in fact require HST to be charged.  For example, an optometrist associate may receive a percentage of the net revenues generated from their sale of eyeglass frames to patients, which is a HST taxable supply.  Therefore that portion of the associate agreement will require HST to be charged and remit if the principal party is a HST registrant.

Consider involving your lawyer and one of our Professional Specialists in this process to obtain a template agreement and ensure that your agreement will meet the CRA requirements.