Federal Court Rejects Employer's Claim for Healthcare Expense Rebate
📌 In brief
The Federal Court of Appeal decided that an employer cannot get a rebate for healthcare expenses paid to employees if the expenses are personal and not related to the employer's business activities. This decision follows previous rulings on similar issues.
⚖️ Legal holding
An employer cannot obtain a rebate for healthcare expenses paid to employees if the expenses are of a personal nature unrelated to the employer's activities.
📖 What the law says
This section defines 'ancillary supply' in the context of the Excise Tax Act. It describes certain exempt supplies related to organizing medical supplies or services, or portions of other supplies, for which a payment is made to the supplier as medical funding.
This section explains that if an employee, partner, or volunteer buys something for their employer, partnership, or charity's activities and pays tax on it, and then the employer, partnership, or charity reimburses them, the employer, partnership, or charity is considered to have received that item for tax purposes.
Plain-English explanation — does not replace advice from a lawyer.
📖 Technical summary
The Federal Court of Appeal dismissed the appeals, upholding the Tax Court's decision that certain healthcare expenses were not eligible for a rebate under the Excise Tax Act.
📜 Headnote Official document
The Federal Court of Appeal upheld the Tax Court's decision denying a rebate for healthcare expenses paid to employees, ruling that such expenses were not eligible under the Excise Tax Act due to their personal nature.
📚 Full judgment Official document
Date: 20260611 Dockets: A-145-25 (lead file) A-146-25 A-147-25 A-148-25 A-149-25 A-150-25 A-151-25 Citation: 2026 FCA 113 CORAM: GLEASON J.A. LASKIN J.A. [NAME] J.A. BETWEEN: [COMPANY] AUTHORITY [NAME] and HIS MAJESTY THE KING Respondent Heard at Toronto, Ontario, on June 11, 2026. Judgment delivered from the Bench at Toronto, Ontario, on June 11, 2026.
REASONS FOR
JUDGMENT OF THE COURT BY: [NAME] J.A. Date: 20260611 Dockets: A-145-25 (lead file) A-146-25 A-147-25 A-148-25 A-149-25 A-150-25 A-151-25 Citation: 2026 FCA 113 CORAM: GLEASON J.A. LASKIN J.A. [NAME] J.A. BETWEEN: [COMPANY] AUTHORITY [NAME] and HIS MAJESTY THE KING Respondent
REASONS FOR
JUDGMENT OF THE COURT (Delivered from the Bench at Toronto, Ontario, on June 11, 2026). [NAME] J.A. [ 1 ] The present consolidated appeals concern a decision of the Tax Court of Canada (2025 TCC 44, the Tax Court Decision) that addressed a number of appeals from assessments made under Part IX of the Excise Tax Act , R.S.C. 1985, c. E-15 (the Act). The [NAME] sought a rebate for selected public service bodies under subsection 259(3) of the Act in respect of reimbursements paid to their employees for their healthcare expenses concerning, among other things, acupuncture, massage therapy, naturopathy and homeopathy services (the Services). The [NAME] disallowed the rebate and the Tax Court refused to intervene. [ 2 ] Essentially, the “non-creditable tax charged” that is used to calculate the rebate under subsection 259(3) is defined, among other things, in terms of tax deemed under section 175 to have been paid. Section 175 applies where (i) an employee acquires a service “for consumption or use in relation to activities of the employer” , (ii) the employee pays the tax payable in respect of that acquisition, and (iii) the employer reimburses the employee. [ 3 ] The Tax Court concluded that the deeming provision of section 175 did not apply because the Services in question acquired by the [NAME]’ employees were not “for consumption or use in relation to activities of the employer” , since they were “of a particularly personal and individual nature, designed to be consumed by the person purchasing the supply” . The Tax Court found that the fact that the [NAME] were contractually obliged to their employees to make the reimbursements in question was “not a sufficient nexus or connection between the Services and the employer’s activities to displace the highly personal nature of these supplies” : see paragraph 30 of the Tax Court Decision. In reaching its conclusion, the Tax Court relied heavily on the decisions of this Court in [COMPANY]. v. Canada , 2010 FCA 1 ( [NAME] ), and [COMPANY]. v. Canada , 2022 FCA 57 ( [NAME] ). [ 4 ] In the present appeals, the [NAME]’ arguments are directed not to distinguishing [NAME] and [NAME] on the facts, but rather to asserting that these two decisions are manifestly wrong and therefore should not be followed. [ 5 ] The [NAME] properly recognize, as was said in [NAME] at paragraph 5, that “[w]e must follow earlier decisions of this Court unless they can be distinguished or are “manifestly wrong” within the meaning of [NAME] v. Canada (Attorney General) , 2002 FCA 370, 220 D.L.R. (4th) 149” [ [NAME] ]. The [NAME] also properly recognize, as indicated in [NAME] at paragraph 10, that “manifestly wrong” means that the Court in the prior decision(s) overlooked a relevant statutory provision or a case that ought to have been followed. [ 6 ] The [NAME] argue several respects in which they say that the decisions in [NAME] and [NAME] are manifestly wrong. Having carefully considered all of these arguments, we are not convinced that any of them have merit. We conclude that we remain bound to follow [NAME] and [NAME] . [ 7 ] The [NAME]’ arguments that either or both [NAME] and [NAME] produce results that are absurd and that they are inconsistent with one another do not meet the requirements of [NAME] that the Court overlooked a relevant statutory provision or a case that ought to have been followed. Rather, they urge us to disagree with the statutory interpretation reached by this Court in previous decisions. [ 8 ] We are also not convinced by the [NAME]’ argument that the interpretation given to sections 174 and 175 in [NAME] and [NAME] overlooked the scheme of the Act and provisions thereof. In [NAME] , Justice Marc Noël (as he then was) considered section 174 in detail and with regard to other provisions of the Act. We see no manifest error there. For his part, Justice David Stratas in [NAME] concluded that the interpretation of section 174 in [NAME] applied equally to section 175. That finding of equal application is not in dispute before us. [ 9 ] Though this Court’s decision in [NAME] of [COMPANY]. v. Canada , 2009 FCA 114, [2010] 2 F.C.R. 344 ( [NAME] ), was not mentioned in either [NAME] or [NAME] , the [NAME] have not convinced us that it was overlooked in either case. [NAME] concerned section 169 of the Act and expenses incurred by the employer concerning the employees’ pension plan and later charged to the plan. [NAME] and [NAME] , on the other hand, concerned expenses incurred by employees and later reimbursed by the employer: in [NAME] , for a moving allowance, and in [NAME] , for healthcare expenses similar to those in the present appeals. It is reasonable to conclude that these distinctions explain why [NAME] was not addressed. [ 10 ] For the foregoing reasons, and despite the able submissions of [NAME], we will dismiss the appeals with one set of costs to the respondent. "[NAME]" J.A. FEDERAL COURT OF APPEAL NAMES OF COUNSEL AND SOLICITORS OF RECORD DOCKETS: A-145-25 ( lead file ), a-146-25, a-147-25, a-148-25, a-149-25, a-150-25, a-151-25 STYLE OF CAUSE: [COMPANY] AUTHORITY v. HIS MAJESTY THE KING PLACE OF HEARING: TORONTO, ONTARIO DATE OF HEARING: June 11, 2026
REASONS FOR
JUDGMENT OF THE COURT BY: GLEASON J.A. LASKIN J.A. [NAME] J.A. DELIVERED FROM THE BENCH BY: [NAME] J.A. APPEARANCES : [NAME] For The [NAME] For The Respondent SOLICITORS OF RECORD : [COMPANY], Alberta For The [NAME] of Canada For The Respondent
⚖️ What tends to weigh in cases like this
✅ Tends to be accepted
- The employer cannot obtain a rebate for healthcare expenses paid to employees if the expenses are of a personal nature unrelated to the employer's activities.
- The Tax Court correctly applied previous decisions from the Federal Court of Appeal in determining that the services were too personal and individual to qualify under section 175.
❌ Tends to be rejected
- The employer argued that the prior decisions were manifestly wrong but did not provide sufficient evidence or overlooked statutory provisions to prove this claim.
- The employer's argument that the interpretation given to sections 174 and 175 in previous cases was inconsistent with the Act’s scheme was not convincing.
Patterns observed in similar cases in this collection — every case is unique.
❓ Frequently asked questions
What did this decision decide?
The Federal Court of Appeal decided that an employer cannot get a rebate for healthcare expenses paid to employees if the expenses are personal and not related to the employer's business activities.
What was the dispute about?
The dispute was about whether an employer could receive a tax rebate for healthcare expenses paid to employees, specifically for services like acupuncture, massage therapy, naturopathy, and homeopathy.
How did the court decide, and why?
The court decided that the healthcare expenses were not eligible for a rebate because they were of a personal nature and not related to the employer's business activities.
Which laws or rules were applied?
The Excise Tax Act, specifically sections 259(3) and 175, were applied.
What was the argument that mattered most?
The argument that mattered most was that the healthcare expenses were personal and not related to the employer's business activities, thus not qualifying for a rebate under the Excise Tax Act.
Was the decision for or against the person who brought the case?
The decision was against the person who brought the case.
What does this mean for someone in a similar situation?
This means that employers cannot claim a rebate for healthcare expenses paid to employees if the expenses are personal and not related to the employer's business activities.
What evidence or documents mattered?
The judgment does not specify the evidence or documents that mattered.