14 January 2003 External T.I. 2002-0174085 - DSLP

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues:

Can amended T4s be issued to an employee who withdraws from a deferred salary leave plan, that qualifies under paragraph 6801(a) of the Act, prior to taking their leave of absence, to report amounts previously deferred as income in the years the amounts were deferred?

Position:

Authority to issue amended T4s must come from local TSO. However, where a prescribed condition of paragraph 6801(a) fails to be complied with in a particular year, amounts previously deferred under the plan are payable and taxable in that year.

Reasons:

Rulings does not have the authority to advise an employer to issue amended T4s. Application of 6801(a), definition of salary deferral arrangement under 248(1), subsection 6(11) and paragraph 6(1)(a) of the Act.

XXXXXXXXXX 							2002-017408	

April 14, 2003

Dear XXXXXXXXXX:

Re: Technical Interpretation - Self-funded Leave Plan

This is in reply to your letter dated September 27, 2002 in which you requested our views concerning the issuance of amended T4 slips in respect of amounts paid out of a self-funded leave plan.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. For more information concerning advance tax rulings, please refer to Information Circular 70-6R5 dated May 17, 2002. Copies of information circulars, interpretation bulletins and guides are available at your local Tax Services Office or on the Internet at http://www.ccra-adrc.gc.ca/formspubs/menu-e.html. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. Please be advised that the Income Tax Rulings Directorate of the Canada Customs and Revenue Agency ("CCRA") does not have the authority to advise employers to amend T4 slips. However, we are prepared to provide the following general comments, which may be of assistance.

As you are aware, the general views of the CCRA concerning deferred salary leave plans are contained in ATR39 Deferred Salary Leave Plan ("ATR-39"). The comments provided in ATR-39 apply to deferred salary leave plans that qualify as prescribed plans or arrangements as defined in paragraph 6801(a) of the Income Tax Regulations (the "Regulations") and do not apply exclusively to deferred salary leave plans established for teachers.

Paragraph 6801(a) of the Regulations prescribes the conditions applicable to a deferred salary leave plan that is a prescribed plan or arrangement that is excluded from being a salary deferral arrangement as defined under subsection 248(1) of the Income Tax Act. These conditions are summarized in ATR-39 under the fourth paragraph under the heading "Law and Analysis". Where any of the conditions listed under the four bullets in this paragraph are not satisfied in a particular year, all salary deferred under a deferred salary leave plan is payable and taxable in that year. Under the second bullet of the fourth paragraph, it states that the purpose of the deferral of an employees' salary must be to allow the employee to fund a leave of absence of not less than 6 consecutive months commencing no later than 6 years after the deferral of salary commences. Where the terms of a deferred salary leave plan permit an employee to withdraw from the plan and an employee participating in the plan withdraws from the plan prior to taking their leave of absence, all amounts previously deferred under the plan are payable and taxable in the year the employee withdraws from the plan. We note that XXXXXXXXXX, a copy of which was enclosed with your letter, reflects this requirement.

We trust the above comments will be of assistance.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate