There remains considerable confusion among healthcare professionals in Canada regarding the taxation of Hospital On-Call Coverage (HOCC) fees. This is a topic I encounter frequently in conversations with clients. One of them recently commented, “I know HOCC fees are a grey area.” My response was simple: they aren’t. In fact, the Canada Revenue Agency (CRA) clarified this matter in Excise and GST/HST News – No. 101 back in March 2017. Despite this clear guidance, misunderstandings persist.
This blog aims to provide medical practitioners with a clearer understanding of the tax treatment of HOCC fees and how it applies to you. If you or your professional corporation is a GST/HST registrant and your hospital is refusing to add GST/HST to your HOCC payment, consider forwarding them the CRA newsletter to help resolve any confusion.
What Are HOCC Stipends?
Hospitals engage medical practitioners to provide on-call services, ensuring essential coverage at all times. Practitioners typically sign agreements with healthcare facilities and receive a set fee for being on-call during specific periods. If they are called upon to provide care, they may receive additional compensation for those services.
The key question is: Should these on-call fees be subject to GST/HST?
CRA’s Clear Position on HOCC Fees
The CRA has clarified in Excise and GST/HST News – No. 101 that on-call fees are subject to GST/HST unless the physician is employed by the hospital. When a practitioner is on call, they supply the hospital with the right to call upon them to provide services if needed. This right is treated as a taxable supply of intangible personal property according to the Excise Tax Act (Canada), specifically under subsection 143(1), which governs such supplies.
It is essential to distinguish between the two meanings of “taxable” used in this context to avoid confusion:
- “Taxable” under the Excise Tax Act (Canada): Refers to goods and services that are subject to GST/HST. If the supply is “taxable” under this Act, it requires the supplier (e.g., the physician or their corporation) to collect and remit GST/HST on the payment.
- “Taxable” under the Income Tax Act (Canada): Refers to income that must be reported for income tax purposes. Even if a fee or service is exempt from GST/HST, the income derived from it is still considered taxable income under the Income Tax Act and must be declared in the physician’s personal or corporate tax filings.
For example, while providing patient care is generally exempt from GST/HST, the income earned from those services must still be reported and taxed under the Income Tax Act.
What Does “Employed by the Hospital” Mean?
This is an area that causes confusion for many physicians, so let’s unpack it.
In income tax law, there is an important distinction between being an employee and working as an independent contractor.
- Employees work under a contract of service, where the employer exercises control over the terms of work, including schedules, tasks, and methods. Employees often receive benefits such as vacation pay, pensions, or health insurance through their employer.
- Independent contractors operate under a contract for services. They have greater autonomy and are responsible for their own tax obligations. Many physicians are independent contractors, either billing directly under their own names or through their professional corporations.
Again, whether the fees are “taxable” under the Excise Tax Act has no impact on income tax obligations. The income from these fees must still be reported as taxable under the Income Tax Act, even if the hospital does not add GST/HST to the payment.
Why Does This Distinction Matter?
The distinction between an employee and an independent contractor has significant tax implications:
- If you are an employee:
- The HOCC fees are treated as employment income.
- No GST/HST is added, as employment income is not subject to GST/HST, but the income must still be reported for income tax purposes under the Income Tax Act.
- If you are an independent contractor:
- The HOCC fees represent a taxable supply under the Excise Tax Act.
- GST/HST applies, and the income must also be reported for income tax purposes under the Income Tax Act.
Are You a Small Supplier?
When we refer to “gross annual revenues of $30,000 or less (before expenses)”, we are referring to income from taxable supplies under the Excise Tax Act. This means that exempt supplies, such as patient care services billed under fee-for-service arrangements, are excluded from the $30,000 threshold calculation.
For example, a physician may earn $300,000 from exempt healthcare services (which are not taxable for GST/HST purposes) and receive $12,000 from taxable supplies (such as HOCC fees). Because the physician’s taxable supplies total less than $30,000 annually, they are not required to register for GST/HST.
This distinction is critical: The small supplier threshold applies only to taxable supplies for GST/HST purposes and does not affect how the physician’s total income is reported under the Income Tax Act.
Practical Implications for Physicians
If you or your professional corporation is a GST/HST registrant and your hospital is refusing to add GST/HST to your HOCC payment, it’s essential to clarify the correct tax treatment. The CRA considers the availability to be called upon as a taxable supply, not a healthcare service. Even if you are called during your on-call period to provide medical care, this does not change the GST/HST treatment of the on-call fee. You can share the CRA’s newsletter with your hospital to help ensure their cooperation.
As a side note, it should also be mentioned that if the consideration for the right to call upon the physician is reimbursed by a provincial government under a healthcare plan, the supply may qualify as an exempt supply under section 9 of Part II of Schedule V of the Excise Tax Act. However, the applicability of this exemption depends on the specific circumstances and is a question of fact.
To Summarize
On-Call Fees:
- Subject to GST/HST if you are an independent contractor and GST/HST registrant.
- Generally, exempt from GST/HST but still taxable for income tax purposes.
Small Suppliers:
- Not required to register for or charge GST/HST if annual taxable supplies are $30,000 or less.
- However, all income must still be reported under the Income Tax Act.
Conclusion
The notion that HOCC fees are a “grey area” is incorrect. The CRA’s guidance is clear: If you are not employed by the hospital and you or your professional corporation is a GST/HST registrant, your on-call fees are subject to GST/HST. For most physicians, who are independent contractors and GST/HST registrants, it is essential to ensure that GST/HST is added to your HOCC payments.
If you need further assistance with GST/HST registration or filing, feel free to reach out for support.
About Tucker Professional Corporation
Tucker Professional Corporation is a Canadian CPA firm that focuses its knowledge, experience, and resources to assist healthcare professionals in reducing their tax exposure. Founded and led by Jonathan Tucker, CPA, CA, LPA, the firm offers a range of services tailored to the healthcare sector, including tax and wealth planning services. Jonathan is recognized for his expertise among Canadian medical practitioners. His firm provides its clients with personalized support and practical insights that ensure clients build wealth for the future while minimizing their tax exposure.
Disclaimer: This blog is for informational purposes only and is not intended as tax or legal advice. Please consult a qualified tax professional before acting on the information provided here. The author and publisher assume no responsibility for any errors or omissions or for actions taken based on this content.
