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Tax on Legal Services – Frequently Asked Questions
Questions:
Answers:
Is adult children's income considered part of the household income where an elderly parent is living in the same household? |
Yes. Elderly parents living with adult children are related by either blood or adoption and therefore are considered a household. Income from all family members living in the household must be considered when determining household income.
Is the parent's income considered when determining household income for legal services provided to a minor? |
Yes. An economic family or household is considered to be a group of two or more persons who live in the same dwelling and are related to each other by blood, marriage, common law or adoption. For the financial eligibility test, family also includes foster parents and their foster children. An unattached individual is a person living either alone or with others to whom he or she is unrelated, such as a roommate or a lodger. If a parent and a minor live in a single household, income from all members of the household must be taken into account when determining household income.
Is my son's income considered when considering household income if my son lives in the in-law suite of our house? |
It depends. You include income from all family members who live at the same address when determining the household income. However, you do not include the income if the in-law suite has a separate legal address.
Is household income determined on a monthly or annual basis? |
It depends. In cases where household income is generally derived from steady employment, current monthly household income may be the best measure. In cases where monthly household income fluctuates, for example, because a member of the household is self-employed or seasonally employed, or receives a court award or settlement, annual household income may be a better measure.
Is income for the purpose of the financial eligibility test determined on the same basis as for income tax purposes? |
No. Income for the purpose of the financial eligibility test is net income (before income taxes) from all sources. Income includes amounts that are not included in net income for the purpose of income tax, such as court awards, settlements of a court action and gains on the sale of a principal residence. See the Income Worksheet attached to the Application for Refund of Tax on Legal Services (FIN 197).
Is my net paycheque amount considered employment income when determining income for the purpose of the financial eligibility test? |
No. The income amounts are before income taxes. You report your gross employment income less the amounts of all deductions (EI, CPP, RSP, union dues, donations, etc.) except income taxes.
Are settlements of court action, such as ICBC motor vehicle claims, personal injury or wrongful dismissal claims, included in income? If so, do I include the net amount after legal fees and disbursements (e.g. expert witness fees) or the gross amount? |
Yes. Court awards and settlements of a court action, including ICBC settlements, are included as income. However, only the net court award or settlement after all costs, such as legal fees and other disbursements, is included as income.
An application for refund was filed by the estate of my late spouse for legal services in settling their estate. Will the estate be eligible for a refund of PST on the legal services? |
No. An estate is not an individual and only individuals will be eligible for a refund if services were billed during the eligible periods and the individual's household income is at, or below, the income threshold.
My lawyer's invoice includes both solicitor and barrister services. How will the cost of the total services be allocated between the two?
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Your lawyer should be able to provide a reasonable allocation between solicitor and barrister services.
Due to the sensitive nature of the legal matters, I do not want to submit my legal invoices. Will I be eligible for a refund if I do not provide the invoices?
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No. You must provide copies of the invoices; however, you may block out sensitive personal information on the invoices. The ministry only requires enough information from a billing for legal services to show:
• who was billed for the legal services
• who provided the services
• the billing date
• the amount of PST on the legal fees, and
• for billings dated on or after December 20, 2005 and before May 25, 2007, the services provided were barrister services
If I have questions about the refund of PST on legal services, whom do I call?
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If you have any questions, please call us at 604-660-4524 in Vancouver or toll-free at 1-877-388-4440, or e-mail your questions to CTBTaxQuestions@gov.bc.ca.
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