Most doctors go their whole career without thinking about HST, and for most of them that is the correct amount of thinking. The trouble is that the exceptions are growing, and the physicians who run into them tend to find out years later.
The general position
Health care services provided by a physician to a patient are generally exempt supplies. Exempt means no HST is charged to the patient, and it also means the doctor cannot claim input tax credits to recover the HST paid on practice costs. That second half surprises people. Exempt is not the same as zero rated. With exempt supplies, the tax you pay on rent, equipment and supplies is simply a cost.
For a physician whose income is entirely clinical care billed to the provincial plan, there is nothing further to do. No registration, no returns, no HST.
Where it stops being simple
Some of what physicians do is not a health care service supplied to a patient for a medical purpose. When the purpose of the work is administrative, legal or aesthetic rather than therapeutic, the exemption may not apply. The usual categories:
- Third party reports and forms. Work done for an insurer, an employer, a lawyer or a government body rather than for the patient's own care.
- Independent medical examinations. Commissioned by someone other than the patient, for a purpose other than treatment.
- Purely cosmetic procedures. Where the procedure is not for a medical or reconstructive purpose.
- Expert witness work and medico legal opinions.
- Some teaching, consulting and speaking arrangements depending on how they are structured and who is paying.
A physician who does a steady stream of insurance forms, IMEs or cosmetic work can quietly build up taxable revenue without ever thinking of it as a separate business.
The threshold
Once taxable revenue passes thirty thousand dollars over four consecutive calendar quarters, you are no longer a small supplier and registration is required. That threshold counts the taxable work only, not your exempt clinical billings. It also arrives quietly, because nobody is issuing you a warning as it approaches.
If you cross it and do not register, you are still liable for the tax that should have been charged, plus interest and penalties, and collecting it retroactively from an insurer two years later is not a pleasant conversation.
The compensating benefit
If you do register, you can claim input tax credits on the costs that relate to your taxable activities. For a physician doing a meaningful volume of cosmetic or third party work, this can be worth having, because it recovers tax on the equipment, supplies and space used for that side of the practice. The allocation between exempt and taxable activity has to be reasonable and documented, which is where an accountant earns their fee.
A practical test. Look at the income that does not come from the provincial plan. Forms, reports, IMEs, cosmetic procedures, medico legal work, honoraria. If that total is approaching thirty thousand dollars in a twelve month period, get it reviewed. If it is nowhere near, you can stop thinking about HST.
What to do about it
Have your bookkeeping separate the non clinical revenue from the start. It costs nothing to track and it means the question can be answered in thirty seconds each year instead of reconstructed under pressure. If you are already past the threshold, register and start charging rather than hoping. The exposure grows every quarter it is left.
The Incorporated Physician's First Year Checklist
Includes how to set up your chart of accounts so exempt and taxable revenue are separated from day one.
If you are not sure which side of the line your work falls on, send us a description of what you do and who pays for it. It is usually a short answer.