CRA has recently been issuing assessments to taxicab fleet management companies for failing to charge GST/HST on pass-through insurance premium expenses.
Standard industry practice in Ontario is for taxi cab drivers to obtain insurance from Canadian insurers by signing up to be part of a fleet with a fleet management company (the "Fleet Manager”). The Fleet Managers typically charge the drivers a small fee to be part of the fleet and arrange for insurance coverage on their behalf, paying applicable insurance premiums to the insurers as agent of the drivers. The Fleet Manager is then reimbursed by the driver for that payment. Fleet Managers do not -- properly in our estimation -- collect GST/HST on the insurance premium payments made by the driver, since they would appear to be reimbursement for payments made by the Fleet Manager as agent.
While CRA has been assessing Fleet Managers for failing to charge GST/HST on the insurance premium payments charged to and reimbursed by the drivers, we believe that this has been an incorrect assessment position. Unfortunately for the Fleet Managers in this situation, it would appear that Tax Court appeals are necessary in order to vindicate their positions.
Millar Kreklewetz LLP has assisted a number of Fleet Managers faced with this type of issue in the past.