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Information About Aquilian Benefits For Accountants
Accountants' BenefitsIf you are an accountant, Aquilian Benefits will waive the $100 enrolment fee for you and give you a steep discount on the administration fee; we don't publish the discount, so please contact us for the details.
If you want to give your clients something special and provide them an escape route from the METC, give them a $100 Gift Certificate from Aquilian Benefits to cover their enrolment fee. It's free to accountants. We will accept either a printed copy or just email us with the contact details of your client(s).
Deciding if an Aquilian plan is right for a client
You can easily decide if a client would profit from an Aquilian plan using our Decision Tool below.
Decision Tool - PHSP vs METC for Ontario.xls
Decision Tool - PHSP vs METC for BC.xls
Enter the client details into the tool and it will tell you whether they are better off using our benefit plan. Don’t forget to enter your fee for completing their form, if you wish to.
If it profits them to use our plan, then print out the existing list of medical expenses from the T1 and use this printed list for submitting the claim: Just put the total at the bottom of the claim form and enter “Refer to attached schedule” in one of the detail lines. You should then delete the details from the T1.
You could also complete their application forms and then have the client sign the application and the claim form; they (or you) then post everything to us with the original receipts and a business cheque for the total at the bottom of the claim form. DONE!
They now have a 100% deductible business expense. And in just a few days, we post a reimbursement cheque for the full claim amount.
For you and your clients we will of course waive the $100 set-up fee.
The Key Concept
In most business transactions, Canada Revenue Agency expects taxation to be triggered at some point. In the case of a PHSP, however, both the recipient (employee) and the employer (PHSP Planholder) escape taxation under the PHSP enabling legislation detailed above.
- Under a PHSP, health care expenses become classed as tax-free medical plan reimbursements and not as a taxable benefits to the employee.
- All expenses incurred for the operation of a PHSP become tax-deductible to the business.
The expenses eligible for reimbursement are exactly those eligible for the personal Medical Expense Tax Credit (METC). The eligible expenses are quite broad and compare extremely well with ordinary employer health insurance. Additionally they are 100% tax-deductible and escape the personal tax threshold for the METC.
The Benefit
If the cost of operating the PHSP is less than the employee's personal tax savings, then an overall tax saving is achieved. This is particularly beneficial to one-person businesses where the benefit is obvious, significantly large and immediate.
The saving with Aquilian Benefits is created by eliminating any use of the Medical Expense Tax Credit ("METC") on the employee's tax return and instead deducting 100% of all costs from business income.
The METC, when you must use it, is calculated first by disallowing the portion of eligible medical expenses that is less than the lesser of $2,023 (for 2010) and 3% of the individual's net income for the year. Any remaining eligible expenses are multiplied by the lowest tax rate percentage for the year (20.05% for 2010 in Ontario) to determine the medical expense tax credit.
This means that you get no credit for the first $2,023 of medical expenses and if your expenses do exceed that amount, you get a credit of only 20 cents per dollar, even if you are paying tax at the higher rates that top out at over 46 cents per dollar in Ontario in 2010.
The Aquilian Benefits Plan refunds all this tax back into your hands.
The Caveats
As always with Canada Revenue Agency, the reasonableness of the deduction claimed is very important. The plan holder's accountant is the best person to provide this advice. When no "arm's-length" individuals are employed by the business the plan holder should be especially prudent. For self-employed sole proprietorships or unincorporated partnerships, there are annual restrictions on the dollar value of the deduction. See Subsection 20.01 of the Income Tax Act of Canada for details. These restrictions are relaxed if "arm's-length" employees are included in the firm.
The Key Pieces of Legislation
The Private Health Services Plan (PHSP) offered by Aquilian Benefits Corporation is structured to qualify as a "private health service plan" as defined in Subsection 248(1) of the Income Tax Act of Canada.The enabling legislation for a PHSP is discussed in the Canada Revenue Agency ("CRA") Interpretation Bulletin IT 339R2. The Aquilian Benefits PHSP operates as a "cost plus" plan.
Incorporated businesses have had deductibility of health benefit plans for some time, but this was extended to self-employed sole proprietorships in 1998 with some restrictions. These restrictions are discussed in the Canada Budget Notes from 1998 and in Subsection 20.01 of the Income Tax Act of Canada. Do not believe anyone who tells you that the self-employed can't use a PHSP!
The discussion of eligibility for claiming a specific health expense is discussed in the CRA Interpretation Bulletin IT 519R2.
The tax free operation of a Private Health Services Plan (PHSP) for planholders and covered employees is specifically explained in CRA IT-85R2.
Some excellent information and examples for claiming PHSP expenses are provided by CRA in the T4002 Business and Professional Income Guide. The specific discussion of PHSP deductions can be found under line 9270 - Other Expenses.
Contact
Postal address:
Aquilian Benefits Corp.
2189 6th Concession Rd.
Uxbridge, ON L9P 1R4
Telephone:
(647) 333-7229
Email:
info@aquilian.ca
Web:
www.aquilian.ca
