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Barter and Payment in Kind – What happens when income is paid in goods and services?

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What happens when income is paid in goods and services (payment in kind)?  

When it comes to calculating income for SABS purposes, it is not always as straightforward as the wages on a pay statement. Occasionally, income comes in the form of goods and/or services.

How do we translate those goods and services, such as living rent-free in exchange for working as a handyman in an apartment building, into income when determining an Income Replacement Benefit (IRB)?


The most important thing to remember is that goods and services earned through employment are considered income. Ideally, the insured has historically reported this income source when filing their income taxes, providing you with a declared value. If the goods and services have not been previously reported for tax, you will need the expertise of a forensic accountant to help you establish a dollar value.


There are many types of employment where a person might be paid in goods and/or services. Consider a nanny who receives room and board as part of the compensation, or a farm hand who is provided accommodations for their horse.

While it might not fall under the general subheading of income on a T4, goods and services earned through the course of employment should be considered income and reported for tax.

How much are the goods and services worth? Canada Revenue Agency (CRA) says they should be given fair market value. “Fair market value is normally the highest price, expressed in dollars, that property would bring in an open and unrestricted market, between a willing buyer and a willing seller who are both knowledgeable, informed, and prudent, and who are acting independently of each other,” according to the CRA’s website.

How do you prove this “income” existed?

In an ideal world, there will be an agreement in writing between the two involved parties indicating that some, or all, of the insured’s compensation will be payment in kind. Furthermore, there will be records indicating what goods were received.

In some cases, the amount of the goods or services might be included on a T4, as in the case of a registered nanny who received room and board in addition to wages. Or, the insured may have historically reported the income for tax, establishing a value upon which to rely. Unfortunately, these examples are not as common as you would hope.

To establish the value, it is important all details of the arrangement are understood.  A good place to start is contacting the other party involved to request details of the arrangement, including what was received in exchange for work completed, and how they valued the goods and services.  This information can then be compared with known market values to establish the income for the purposes of calculating an IRB.

Remember, IRBs are not about precision, but about reasonableness.

What if the income hasn’t been reported for tax?

If the insured has failed to report the goods and/or services as income for tax purposes, it is not included as pre-accident income, pursuant to s.4(5) of the Statutory Accident Benefits Schedule (SABS). However, depending upon the date of the motor vehicle accident and when the calculation is being performed, s.4(5) may not yet apply, and so it is important to understand when a tax return for any specific period is due.

Alternatively, there is an opportunity for the insured to file a T1 adjustment with CRA. The IRB would be adjusted upon receipt of the Notice of Reassessment, pursuant to s.4(6) of the SABS. In some situations, additional support may be required to confirm the accuracy of the amounts reported for tax purposes.

As s.4(5) applies to only pre-accident income, the goods and services do not have to be reported for tax to be considered post-accident income.

What decisions support this approach?

In Healey and Pafco Insurance (FSCO A00 B 000493), Healey worked part-time at Black’s Equine Centre, where, in exchange for her work, she was provided with the opportunity to board her two horses at the facility free of charge. The cost of boarding the horses would have been $500 a month, minus the $100 of grain and hay she supplied to care for her horses. Healey claimed her income for IRB purposes was $400 per month for her work at Black’s. The president and CEO of Black’s sent a letter confirming that Healey worked in exchange for board for her horses.

Arbitrator Sone found the value of Black’s payments in kind is included in income for the purposes of the Schedule, “because income includes ‘other remuneration’ such as items or services that are worth money.” She goes on to point out, and reference, a number of cases at the Commission where arbitrators have taken the same approach, including Alobic and Maplex General Insurance (FSCO A97-001365), Zehr and The Guarantee Company of North America (OIC A-001963), and Vink and Co-operators General (OIC A-010589).

“The term “income” is not defined in the No- Fault Benefits Schedule or the Insurance Act. As has often been said in arbitration decisions, the Schedule must be given a broad, liberal, and remedial interpretation in keeping with the purpose of the legislative scheme. I find that “income” may include cash payments that are not specifically identified as “salary”; and payments in kind, including food,” Sone wrote in the decision, quoting Arbitrator Makepeace in the Zehr decision.

“Arbitrator Makepeace also quotes Arbitrator Naylor in Bress and State Farm Insurance Companies . . . who stated the word “income” implies that something of value is received “in return for” the insured person’s labour,” Sone found. “In addition, Arbitrator Makepeace notes at page five that “income tax returns are relevant, but not conclusive evidence of a person’s income, and that the arbitrator must determine pre-accident income on the basis of all the evidence.”

Sone concluded that Healey was entitled to receive a weekly IRB for work she performed at Black’s Equine Centre.

As another example, Ledrew and Pilot Insurance Company (FSCO A99-000707) addresses a superintendent who receives cash wages as well as rent in lieu of payment.

What this means for you

If an insured received goods and/or services in exchange for work performed, the fair market value of same should be considered as income for IRB purposes. This applies to both pre and post-accident income.

If you have specific questions about how to translate barter or payment in kind for the purposes of calculating an IRB, do not hesitate to contact an ADS accountant, who would be pleased to assist.

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