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Amendments to Assessment (Revenue Services) Policies

99/09/21-07

THE WORKERS' COMPENSATION BOARD OF BRITISH COLUMBIA

RESOLUTION OF THE PANEL OF ADMINISTRATORS

Re: Amendments to Assessment (Revenue Services) Policies


WHEREAS:

Pursuant to Section 82 of the Workers Compensation Act, RSBC 1996, Chapter 492 and amendments thereto (the "Act"), the Panel of Administrators must approve and superintend the policies and direction of the Workers’ Compensation Board (the "Board"), including policies respecting compensation, assessment, rehabilitation and occupational safety and health;

AND WHEREAS:

Pursuant to Section 39 of the Act the Board must levy on and collect from independent operators and employers sufficient funds for the purposes set out in Section 39, and in the manner and form and by the procedure provided for in Section 39;

AND WHEREAS:

The Revenue Services Department of the Board has proposed certain amendments to the policies concerning the audit and collection of employer accounts;

AND WHEREAS:

The purpose of the proposed amendments is to clarify the policies, reflect internal changes in responsibility and changes to other legislation, and provide additional flexibility to the Board in its audit and collection functions;

THE PANEL OF ADMINISTRATORS RESOLVES THAT:

The amendments to the Assessment Policy Manual attached as Appendix A are approved, effective the date of this resolution.

DATED at Richmond, British Columbia, October 13, 1999.

  By the Workers' Compensation Board
  DON COTT, CHAIR
PANEL OF ADMINISTRATORS

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ASSESSMENT OPERATING POLICY

SUBJECT: TEMPORARY EMPLOYERS

POLICY NO. 20:30:40

PAGE 2 OF 3

DATE: ???

REPLACES ISSUE DATED: Nov/94

An employer who qualifies as an "independent firm" under Policy 20:30:20 and who (or intends to) hauls goods (or intends to haul goods) out of B.C. seven or more times per calendar year must register.

The determination of whether an out-of-province firm in all other industries is carrying on business in B.C. "temporarily" is made on the basis of the number of occasions the firm comes (or intends to come) into the province.

  1. If the firm comes (or intends to come) into the province for a total of 15 or more days per year, registration is required regardless of the number of occasions the firm comes into the province.
  2. If the firm comes (or intends to come) into B.C. for a total of ten to fourteen days as the result of three or more visits within the year, registration is required.
  3. If the firm comes (or intends to come) into B.C. for a total of ten to fourteen days as the result of one or two visits within the year, registration is not required.
  4. If the firm comes (or intends to come) into British Columbia nine days or less within the year, registration is not required regardless of the number of visits.

It must be noted that if an out-of-province employer establishes a place of business in B.C. or employs B.C. residents, that employer must register with this Board. The assessment of out-of-province employers is covered in Section 40:20:20 of this manual.

Responsibility For Out-of-Province Contractors Working In BC:

Where a contractor hires a labour contractor (determined by the labour contractor's activities in B.C. — see Policy 20:30:20 for a definition of labour contractor) from out-of-province to work in B.C., the contractor is responsible for the labour contractor’s coverage unless the labour contractor is registered with the B.C. Board. This policy applies regardless of the amount of time the labour contractor spends in B.C. or the number of trips the labour contractor makes into B.C.

All contractors should be aware that under Section 51 of the Workers Compensation Act, a contractor and the person or firm he/she is doing work for are both liable for any WCB assessment that their sub-contractors fail to remit to the Board.

 

ASSESSMENT OPERATING POLICY

SUBJECT: ASSESSABLE PAYROLL

POLICY NO. 40:10:10

PAGE 1 OF 2

DATE: ???

REPLACES ISSUE DATED: NOV/94

Section 39(1) of the Act states that the Board must collect sufficient funds from employers each year to meet all amounts payable from the Accident Fund during the year, and to provide certain reserves (see Section 30:30:00 of this manual - Rate Making). These funds are to be collected by means of assessments on payroll, units of production or in any manner the Board considers proper. The provisions of Section 39(1) give the Board the flexibility to make regulations concerning the assessment of employers in industries where the manner of payment to workers does not follow established payroll procedures. The Commercial Fishing industry (see Section 40:20:10) is a departure from established payroll procedures, and the rules for the assessment of this industry are established in Section 4 of the Act and regulations made under Section 4.

The first step in the assessment of an employer is to establish the Assessable Payroll. The Assessable Payroll is considered by the Board under four general categories, any one of which may or may not be applicable to the employer in question. These components are:

  1. Wages and Salarie
  2. Personal Optional Protection
  3. Principals' Earnings
  4. Contractors' Earnings

The category Wages and Salaries includes the gross earnings of all workers, including casual workers, except those individuals subject to Personal Optional Protection (see Section 20:50:00) or covered under one of the other categories of Assessable Payroll. These earnings include wages, salaries, commissions, holiday pay, bonuses, and piecework, etc., as well as any other means or manner by which a worker is paid for services.

Casual workers, whether they receive a T-4 or not, are defined as any individuals who have received remuneration for services but have not had income tax, Canada Pension Plan (CPP) contributions or Employment Insurance (EI) premiums deducted from their remuneration. These workers may be recorded separately within the company’s accounting records.

If the employer is a limited company, the active principals or shareholders are considered workers for compensation and assessment purposes. In view of this, their earnings must be included in the Assessable Payroll. Principals' earnings are discussed in detail in Section 40:10:30.

ASSESSMENT OPERATING POLICY

SUBJECT: MAXIMUM WAGE
(EXCESS EARNINGS)

POLICY NO. 40:10:20

PAGE 1 OF 1

DATE: ???

REPLACES ISSUE DATED: MAR/95

The earnings of workers are assessable up to a maximum wage rate per individual in any given year while working for the same employer. The amount by which an individual's earnings exceed the maximum wage level is known as Excess Earnings, which may be deducted from total earnings to arrive at the Assessable Payroll. This maximum wage rate is adjusted annually by a formula stipulated in the Act.

The maximum wage rate is not proratable; that is, all earnings up to the maximum are fully assessable and the maximum wage figure may not be prorated on a monthly or other basis. The only exception to this rule is where an individual works in B.C. and also in another province or territory in Canada which is a party to the Interjurisdictional Agreement. In this case, the employer may prorate the Excess Earnings of that individual on the basis of the relationship between the individual's B.C. earnings and the individual's total earnings. See Section 40:20:20 for a complete discussion of Extra-Provincial Operations.

The maximum wage rate and excess earnings deduction applies to workers of all firms and principals of limited companies.

Refer to 40:10:40 for the policy on the Maximum Wage (Excess Earnings) for contractors.

A deduction for Excess Earnings may not be taken from a contractor’s earnings when determining the employer’s assessable payroll, unless the contractor’s records are supplied for payroll verification.

Where substantiating detail is not provided the deduction may be disallowed.

Excess earnings will not be prorated or transferred between legal employers. When two or more companies amalgamate and continue as one company under Section 271 of the Companies Act (the amalgamated company holds and possesses all of the property, rights and interests and is subject to all of the debts, liabilities and obligations of each amalgamating company) we will assign a new registration number but we will transfer experience and excess earnings.

ASSESSMENT OPERATING POLICY

SUBJECT: ACTIVE PRINCIPALS' SHAREHOLDERS', DIRECTORS', OR OFFICERS' EARNINGS

POLICY NO. 40:10:30

PAGE 1 OF 3

DATE: ???

REPLACES ISSUE DATED: JUL/90

Shareholders, directors, or officers of a corporation who have any degree of activity in the operation or who are officers of the corporation are considered to be workers of the corporation. They qualify for the benefits prescribed by the Act and their remuneration is subject to assessment. Therefore the aggregate total of remuneration paid to each active shareholder, director, or officer is considered to be assessable up to the maximum wage rate as outlined in Policy 40:10:20. earnings level.

Remuneration is defined as any payment made to the active shareholders, directors, or officers regardless of label and recorded as a business expense with the exception of reimbursement of out-of-pocket business expenses. This definition would also include payment of personal expenses made by the corporation on behalf of the active shareholder, director, or officer.

Assessable remuneration paid to active shareholders, directors, or officers includes:

  • T-4 earnings of any amount up to the maximum wage rate as outlined in Policy 40:10:20;
  • Management Fees of any amount up to the maximum wage rate as outlined in policy 40:10:20.

If a director of a publicly traded company receives a T-4 for Director’s Fees, these Directors’ Fees are not assessable if the director:

  1. only attends periodic meetings and
  2. is not a part- or full-time employee and
  3. is not an officer of the corporation.

Fees paid to directors of private companies are assessable.

Where an active shareholder, director, or officer receives no or nominal remuneration for a calendar year, there is no remuneration or the aggregate remuneration is considered to be nominal then an evaluation for services is required. Nominal is defined as an amount which is less than the minimum Personal Optional Protection amount for the time period being assessed. An evaluation can be pro-rated when the operation is of a part-time or seasonal nature. After considering the nature and scale of the business and whether it is seasonal or part-time, the aggregate remuneration may be deemed appropriate for W.C.B. assessment purposes. In such a situation it will be accepted and assessed. In general, for full-time activity the evaluation will be equal to the minimum Personal Optional Protection amount for the time period being assessed. After considering the nature, scale and scope of activity of the business and whether it is part-time or seasonal, an evaluation may be changed to an amount less or more than the minimum Personal Optional Protection amount for the time period being assessed.

Fees paid to Directors of publicly-traded companies who are neither officers nor part or full-time employees for attending periodic Director meetings are not assessable. Fees paid to Directors of private companies are assessable.

Dividends are will not normally be assessable as they are a distribution of after-tax earnings. However, if dividends are paid as remuneration for activity in the company, they are considered part of assessable payroll. If dividends are the sole method of remuneration then the cash value of the dividend will be the basis for an evaluation. The evaluation will generally be at least the minimum Personal Optional Protection amount. If the remuneration is considered nominal but dividends have been paid then the aggregate total of the remuneration and the cash value of dividends will be assessed as an evaluation.

If an individual is an active shareholder, director, or officer of more than one registered firm, then the combined remuneration from all registered firms is assessable up to the maximum wage rate as outlined in Policy 40:10:20. These combined earnings are subject to pro-ration between the various firms on the basis of Policy 40:10:50.

ASSESSMENT OPERATING POLICY

SUBJECT: ACTIVE PRINCIPALS' EARNINGS

POLICY NO. 40:10:30

PAGE 2 OF 3

DATE: ???

REPLACES ISSUE DATED: JUL/90

*The Assessment Department will consider the spouse, or child or other family member of a principal or a shareholder receiving a T-4 to be active in the business and those earnings assessable.

Where an individual is issued a T-4 from an employer, the employer is declaring to Revenue Canada that this individual was active in receiving income from the business. The employer declares this amount as an expense and deducts it from the company's taxable earnings.

The Income Tax Act states that such a deduction can be made by a taxpayer only in respect of an outlay or expense that was made for the purpose of gaining or producing income from the business.

Although the T-4's issued for this income usually agree with the payroll, where there is a difference the greater amount will be assessed if it is above a nominal amount.*

ASSESSMENT OPERATING POLICY

SUBJECT: ACTIVE PRINCIPALS' EARNINGS

POLICY NO. 40:10:30

PAGE 3 OF 3

DATE: ???

REPLACES ISSUE DATED: JUL/90

Examples of the application of this policy to amounts reported or determined by audit are:

1. Salary -$12,000 Accept

2. Salary -$ 6,000 Increase to Minimum POP*

3. Management Fee -$50,000 Deemed Evaluation

Assess up to Maximum**

4. Salary -$ 6,000 Combine and

Dividend -$10,000 Assess

5. Dividend -$25,000 Deemed Evaluation

Assess

6. Salary -$12,000

Dividend -$12,000 Assess Salary Only

7. Fair Evaluation

By Firm -$12,000 Accept

8. Fair Evaluation

By Firm -$8,000 Increase to Minimum POP*

9. No Recorded Remuneration Evaluation Required***

* Subject to consideration of nature, scale or duration of business.

** Where paid to an individual.

*** Set up at the minimum Personal Optional Protection amount unless circumstances dictate a lesser amount.

ASSESSMENT OPERATING POLICY

SUBJECT: CONTRACTORS' EARNINGS

POLICY NO. 40:10:40

PAGE 1 OF 2

DATE: ???

REPLACES ISSUE DATED: MAR/95

The earnings of non-registered contractors or individuals employed on a contract or piecework basis must be included in the Assessable Payroll, except for those contractors who supply labour and all materials to complete the contract or who are limited companies. For labour-only contracts, the employer is assessed on the gross value of each contract. For contracts involving the supply of labour and equipment, an equipment allowance may be deducted from the gross contract value where the contract requires use of revenue-producing equipment. Each situation will be reviewed and an allowance given if considered appropriate. The amount of the allowance will be determined having regard to such factors as the cost of purchasing the equipment and its ongoing operating cost and should be 15%, 40% or 75%. A list of established equipment allowances is available from the Assessment Department on request.

ASSESSMENT OPERATING POLICY

SUBJECT: THE AUDIT SECTION

POLICY NO. 50:10:00

PAGE 1 OF 1

DATE:

REPLACES ISSUE DATED: JAN/83

SECTION 50:10:00 - THE AUDIT SECTION

The primary objective of the Audit Section is to ensure that employers are meeting their reporting requirements and payment obligations by auditing accounting or other records and amending or confirming the final assessment for which the employers are liable. These audits (Payroll Examinations) are performed by Assessment Officers, each of whom is responsible for firms in a specific geographic area.

In addition, Assessment Officers will assist the Collection Section through on-site collection of outstanding balances and/or review all documentation of assets or other sources of funds, verify that employers are assigned to the correct industry classification, and ensure compliance with other assessment-related requirements.

Other responsibilities of the Audit Section may include the cancellation of accounts, evaluation of employers' annual payroll reports and estimation of payroll under the authority of Section 38 of the Act. The balance of this part will briefly discuss each of these responsibilities.

ASSESSMENT OPERATING POLICY

SUBJECT: CANCELLATION OF ACCOUNTS

POLICY NO. 50:30:00

PAGE 1 OF 1

DATE: ???

REPLACES ISSUE DATED: 4 MAR/95

It is the employer's responsibility to notify the Board when operations have ceased, when voluntary coverage or a variance from general exemption coverage is no longer required or when the employer is no longer employing workers and does not require Personal Optional Protection. When this information is received by the Board, the employer's account is suspended and a payroll report is mailed to the employer requiring completion and return within 10 days. When the report is returned by the employer, an Assessment Officer will examine it in the manner discussed in Section 50:20:00 and cancel the account.

If an employer does not return the final payroll report when required, it is the Audit Section's responsibility to follow up and cancel the account. If unable to locate the employer, the Audit Section will cancel the account with a Section 38 payroll estimate (see Section 50:60:30). Following up these accounts has a high priority, and is usually done before any audits are performed.

An Assessment Officer will often perform a payroll examination in order to cancel an account. This occurs when the final liability for the firm must be established quickly (e.g. a bankruptcy or receivership situation), when the Assessment Officer is not satisfied with the firm's final payroll report, or at any other time it is considered appropriate to perform a payroll examination to cancel an account.

ASSESSMENT OPERATING POLICY

SUBJECT: CANCELLATION OF ACCOUNTS

POLICY NO. 40:60:00

PAGE 1 OF 3

DATE: NOV/94

REPLACES ISSUE DATED: JUN/93

SECTION 40:60:00 - CANCELLATION OF ACCOUNTS

An account with the Board is cancelled when the firm ceases to be an employer under the Act, or, in the case of Personal Optional Protection only accounts, and voluntary registrations when a request for cancellation of the coverage is received from the employer. The effective date of cancellation for accounts is the date the employer ceased operating the business, while in voluntary registrations and Personal Optional Protection accounts it is the date the request for cancellation is received by the Board. Personal Optional Protection and voluntary coverage may also be cancelled by the Board for non-compliance with assessment filing requirements. The cancellation of Personal Optional Protection and voluntary accounts is discussed in Part 2 of this manual.

It is the employer's responsibility to notify the Board when operations have ceased, when voluntary coverage or a variance from general exemption coverage is no longer required, or when the employer is no longer employing workers and does not require Personal Optional Protection. When this information is received by the Board, the employer's account is cancelled. When an employer contacts the Board to inform the Assessment Department that the employer has ceased operating, an Employer Service Representative will suspend the account and mail an Employer's Payroll and Contract Labour Report to the employer with a letter requesting that the report be completed and returned with payment of the assessment within 10 days. When the account is suspended cancelled, the employer will no longer receive remittance reports or penalty assessments for non-return of remittances. However, the employer will continue to receive monthly statements and interest charges if the account has an outstanding balance.

Once an employer's account has been suspended, it is the responsibility of the Assessment Officer for the employer's geographic area to cancel the account. In order for an account to be cancelled, a payroll report containing the employer's Assessable Payroll up to the date operations ceased must be processed by the Assessment Officer. This means that the Assessment Officer must contact all employers who do not return the Employer's Payroll and Contract Labour Report to obtain the payroll figures. In some cases, the Assessment Officer will perform a Payroll Examination of the employer's records to cancel the account. The role of the Assessment Officer is the subject of Part 5 of this manual.

The actual date used for cancellation may be different than indicated in the foregoing if the firm is a labour contractor - supplying labour only or labour and equipment.

ASSESSMENT OPERATING POLICY

SUBJECT: WRITE-OFFS

POLICY NO. 70:20:90

PAGE 1 OF 1

DATE: JUN/93

REPLACES ISSUE DATED: JUL/90

If an account is cancelled and all attempts to collect the outstanding balance have been unsuccessful, the Collections Officer will recommend that the Board "write off" the balance as uncollectable. When a balance is written off, it does not mean that the balance is eliminated, but that attempts to collect the balance have been suspended. Should the circumstances change in the future to allow further collection efforts, or should the employer revive the account with the Board, the balance is immediately reinstated. Any write-offs must be approved by the Collections Manager or Assistant Manager. The Vice President, Finance/Information Services, shall establish the levels of authority for approving the writing off of uncollectable accounts.

ASSESSMENT OPERATING POLICY

SUBJECT: BANKRUPTCIES AND
RECEIVERSHIPS

POLICY NO. 70:30:00

PAGE 1 OF 2

DATE: JUN/93

REPLACES ISSUE DATED: JUL/90

 

SECTION 70:30:00 - BANKRUPTCIES AND RECEIVERSHIPS

When a Collections Officer or the Legal & Insolvency Clerk receives notification from a trustee that a firm has filed an Assignment in Bankruptcy, the first step that must be taken is establish the final assessment liability for the firm. If the account has already been cancelled and the outstanding balance is less than $50.00, the balance is written off and the trustee is notified that the Board has no claim. If the account is not cancelled, the Audit Section is notified and a cancelling audit is performed as soon as possible to establish a final liability. If the account has an outstanding balance greater than $50.00 after cancellation, the balance is placed on Judgment Code so that it does not continue to accrue overdue penalty charges and so the account will not receive the monthly statements. Any penalty assessments and/or overdue penalty charges incurred after the assignment date are cancelled.

When the final liability of the firm has been established, a detailed Statement of Account is prepared and it is submitted to the trustee along with a Statutory Declaration Proof of Claim which establishes the Board's claim as that of a preferred an unsecured creditor under Sections 107 (1)(h) Sections 86 and 87 of the Bankruptcy and Insolvency Act. Once these documents have been filed, the trustee has the sole responsibility for the distribution of the firm's estate in accordance with Section 107 136 (1) of the Bankruptcy and Insolvency Act. However, the Assistant Collections Manager Collection Officer, or Legal & Insolvency Clerk will monitor the dispersal of the estate and take whatever steps are available to improve the Board's position. In addition, collection remedies under Section 51 may still be pursued.

When a firm has gone into receivership, notifications may be received from the receiver, the firm, newspapers or by word of mouth. The procedure for establishing the final liability, writing off accounts under $50.00, cancelling overdue penalty and penalty assessments applied after the receivership date and filing a claim with the receiver is exactly the same as that followed in a bankruptcy situation. However, should a receiver-manager be appointed subsequent to the cancellation of the firm placed into receivership, a new registration must be established for the receiver-manager.

ASSESSMENT OPERATING POLICY

SUBJECT: BANKRUPTCIES AND
RECEIVERSHIPS

POLICY NO. 70:30:00

PAGE 2 OF 2

DATE: ???

REPLACES ISSUE DATED: JUN/93

The receiver or the receiver-manager is responsible for the distribution of the firm's estate to the creditors in the order of the ranking of their liens. The Board, under the provisions of Section 52 of the Workers Compensation Act, claims a priority position in a receivership. Since the distribution of a firm's estate by a receiver is not governed by the Bankruptcy and Insolvency Act, the Board can continue to pursue the collection remedies created by Sections 45, 51 and 52 of the Workers Compensation Act. However, if a receiver or receiver-manager is appointed subsequent to an Assignment in Bankruptcy, the Board’s claim is then governed by the Bankruptcy and Insolvency Act provisions.

When notice is received of a personal or corporate bankruptcy and the bankrupt is a partner in a personal or corporate partnership, the Board has two avenues of satisfying the amount owing:

1. When the final liability of the firm has been determined, submit a claim for the entire partnership debt to the Trustee.

2. Advise the remaining partner(s) of the debt and their joint and several responsibility for the amount owing. Check with the Trustee concerning the anticipated likelihood of the Board's claim being satisfied from the Bankruptcy Estate.

  1. If no distribution to creditors is anticipated, proceed against the remaining partner(s) for satisfaction of the entire account.
  2. If partial or total distribution is expected, a proportionate portion should be collected from the non-bankrupt partner(s) pending completion of the Bankruptcy administration. If balance of claim not satisfied by Trustee, proceed against non-bankrupt partner(s).

ASSESSMENT OPERATING POLICY

SUBJECT: PAYMENT PROPOSALS

POLICY NO. 70:20:20

PAGE 1 OF 1

DATE: MAY/85

REPLACES ISSUE DATED: JAN/83

Payment proposals from a delinquent employer may only be considered when the account is cancelled, or when the account is active and current assessments are being paid when due. In all cases, payment proposals should be considered with the purpose of satisfying the outstanding amount in the least time possible. usually in monthly installments of at least 25% of the outstanding amount. However, in cases where the account is cancelled and is otherwise a possible write-off, or where the Board's position is well secured, payments of less than 25% an extended payment period may be accepted. The Vice President, Finance/Information Services (or delegate) will determine the nature and form of security that is acceptable to the Board. Payment proposals should not normally be considered when Personal Optional Protection is in effect or when the outstanding amount is already on Judgment.

Once accepted, pProposals must meet the following conditions:

1.   Post-dated cheques will be required wherever possible in advance of a payment proposal being accepted.
2. 1. Current remittance requirements, where applicable, are to be maintained.
3. 2. Monthly overdue penalty charges will continue to accrue while the proposal is in effect. The exception to this is when the delinquent employer is a corporation, and a principal of the company is undertaking payment of the outstanding balance after the company's account with the Board has been cancelled. Under those circumstances, the balance is put on Judgment status so that it does not accrue overdue penalty charges.
4. 3. The accepted proposal must be strictly adhered to.

When a proposal has been accepted, the employer is sent a letter confirming the payment arrangements and conditions, and the account is reviewed on a monthly basis to ensure payment compliance.