Practice Tips: Money Matters
by Dave Bilinsky, Practice Management Advisor
GST on Medical-Legal Reports
One question that I am asked on a repeated basis is whether or not Medical-Legal Reports and copies of Clinical Records bear GST. There is some confusion over this point, as physicians may or may not charge GST when they render their accounts for the supply of these services.
This topic is covered in detail in GST Policy Statement p-209, Lawyers' Disbursements, which is available on the Canada Revenue Agency's website. The policy states that supply of these services is taxable, regardless of whether or not the physician charged GST on their account for these reports. However, the supply of these reports cannot be claimed as exempt medical services under the Excise Tax Act, Schedule V. Accordingly, they are taxable in the hands of the lawyer.
There are a number of reasons why a physician may not charge GST on their invoice, not the least of which is that they may be under the $30,000 taxable limit (one does not need to charge GST if the annual total of these services does not exceed $30,000).
Whether or not the physician charges GST does not change the requirement for lawyers to remit GST on these reports, and presumably, charge for the GST when rendering their accounts and include these amounts on their Bills of Costs.
Chapter 11, Rule 8, footnote 1 of the Professional Conduct Handbook states that:
Unless funds are to be paid under an agreement that specifically requires another form of payment or payment by another person, a lawyer must not refuse to accept another lawyer's uncertified cheque for the funds. It is not improper for a lawyer, at his or her own expense, to have another lawyer's cheque certified.
It may be prudent for a lawyer receiving a trust cheque from another lawyer or firm to request that the paying law firm certify their trust cheque, at the expense of the receiving lawyer, in advance of the closing date.
There are a number of reasons for doing so, not the least of which is the increasing amount of fraud being attempted against lawyers and law firms. Further, banks are frequently placing "holds" on uncertified funds, including lawyer trust cheques, before depositing them. A seven-day "hold" can wreak havoc on domino real estate transactions.
Certified funds provide greater security when funds must flow quickly and reliably, such as "back-to-back" real estate transactions.If these issues are raised in advance, all parties can make the proper accommodations to allow matters to close quickly and reliably.
Lastly, it is often inconvenient for the receiving lawyer to take the paying lawyer's trust cheque to the bank. Reimbursing the sending lawyer a reasonable amount to certify their trust cheque allows the expense to be built into the transaction. Furthermore, it assures the sending lawyer that they are being compensated for their time and trouble to certify their trust cheque, allowing for a sense of enhanced security for the entire transaction.
In a world where lawyers often have to pay out funds on the day they were received, it is comforting to know that you can have the highest degree of faith in the financial instrument on which you are relying.