24 February 1997 External T.I. 9700025 - FARM SUPPORT PAYMENTS

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether a payment made under the HACCP program is taxable and whether the payment would be considered a farm support payment.

Position:

Yes, the payment would be reported by the recipient either as income or a reduction of expenses or other costs as the case may be. The payment would not be considered a farm support payment.

Reasons: ITA

Agriculture and Agri-Food Canada
Corporate Services Branch
Room 887, Sir John Carling Building		970002
930 Carling Avenue				M.P.Baldwin
Ottawa, Ontario
K1A 0C5

Attention: Ms. Jennifer Bryant, C.A.

February 24, 1997

Dear Sirs:

Re: Tax Ruling Grants to Organizations - Agriculture Adaptation

This is in reply to your letter of December 19, 1996 in which you request a ruling on the tax treatment of the National Hazard Analysis Critical Control Point ("HACCP") Adaptation Contribution Program.

Written confirmation of the tax implications inherent in proposed transactions are the subject of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R3. Consequently, we can only offer the following general comments.

Our understanding of the HACCP is that implementation of HACCP systems will help to maintain exports, continue world-wide acceptance of Canadian products, increase domestic and international marketability and enhance the agri-food industry's ability to economically produce safe food of high quality.

HACCP is an internationally recognized, science-based system designed to assure the safety of food. It will be a shift of emphasis from intensive inspection and end product testing to exercising better control along the manufacturing process, at critical steps called critical control points.

The objective of the program is to provide assistance for the development and implementation of HACCP systems, including associated training, which will contribute to the efficiency of the food safety inspection program, and the advancement and competitiveness of the Canadian agri-food processing sector. The eligible applicants will be small and medium sized food processing establishments.

The eligible initiatives are those which satisfy the objective of those terms and conditions such as: technical assistance, advice, plan development, implementation and training only. Initiatives which support the implementation of HACCP may be categorized into four stages. To be eligible for any stage of the program, the establishment must have been implemented the previous stage.

At the discretion of the Minister of Agriculture and Agri-Food Canada, all reasonable costs associated with the initiative, excluding capital expenditures, are eligible for reimbursement.

In our opinion, based on the above information, the payments made to the food processing establishments would have to be reported by the recipients either as income or a reduction of expenses or other costs, depending on the circumstances. It is also our opinion that these payments do not meet the definition of farm support payment pursuant to subsection 234(2) of the Income Tax Regulations and as such no T-slip would be required.

We trust our comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch