The “More Than Five Full-Time Employees” Test
In 489599 B.C. Ltd. v. The Queen, 7 a CCPC had five full‑time employees and two part‑time employees. The issue was whether the CCPC employed “more than five full‑time employees” for the purposes of the definition of “personal services business” set forth in subsection 125(7). The Tax Court of Canada concluded that the CCPC did have more than five full‑time employees, that is, that the provision did not require it to employ at least six full‑time individuals, as indicated in paragraph 15 of IT-73R6. 8
Question
Does the CRA agree with the interpretation given by the Tax Court of Canada in the 489599 B.C. Ltd. case?
Response
The CRA accepts the decision in 489599 B.C. Ltd.that,in determining whether a corporation is carrying on a “personal services business” as defined in subsection 125(7), the requirement in paragraph (c) of the definition that the corporation employs “more than five-full time employees” is met when a corporation has five full-time employees plus one or more part-time employees. This interpretation is also applicable to determining whether or not the “more than five full-time employees” requirement in the definition of “specified investment business” is satisfied. This supersedes the position set out in paragraph 15 of IT-73R6.