{"id":2988,"date":"2020-05-20T09:00:20","date_gmt":"2020-05-20T13:00:20","guid":{"rendered":"http:\/\/stage.tbkdev.com\/dev\/davismartindale.com\/src\/?p=2988"},"modified":"2020-06-15T11:59:38","modified_gmt":"2020-06-15T15:59:38","slug":"self-employed-individuals-last-52-weeks-or-last-completed-taxation-year","status":"publish","type":"post","link":"https:\/\/stage.tbkdev.com\/dev\/davismartindale.com\/src\/self-employed-individuals-last-52-weeks-or-last-completed-taxation-year\/","title":{"rendered":"Self-Employed Individuals \u2013 Last 52 Weeks or Last Completed Taxation Year?"},"content":{"rendered":"

[vc_row][vc_column][basic_container container_size=”container container-narrow” bg_overlay=”overlay-light”][vc_column_text]For self-employed individuals seeking to claim an income replacement benefit (\u201cIRB\u201d), the calculation of their pre-accident gross weekly income is not always straightforward.\u00a0 Two recent Licence Appeal Tribunal (\u201cLAT\u201d) decisions have added another wrinkle to the calculation of a self-employed claimant\u2019s pre-accident gross income.<\/p>\n

In the decisions K.D. v. Aviva Insurance (18-011646\/AABS)<\/em> and V.H. v. Aviva Insurance (18-009156\/AABS)<\/em>, both adjudicators ruled that the calculation of a claimant\u2019s pre-accident gross income earned during the 52 weeks before the accident is not consistent with the Statutory Accident Benefits Schedule for accidents occurring on or after September 1, 2010 (\u201cSABS\u201d).\u00a0 In both decisions, the adjudicators dismissed the claimant\u2019s accountant\u2019s calculations of the claimant\u2019s pre-accident income earned during the 52 weeks before the accident.<\/p>\n

In both of the decisions, the respondents relied on Section 4(3) of the SABS, which states:<\/p>\n

\u201cA self-employed person\u2019s weekly income or loss from self-employment at the time of the accident is the amount that would be 1\/52 of the amount of the person\u2019s income or loss from the business for the last completed taxation year as determined in accordance with Part I of the Income Tax Act (Canada).\u201d<\/em><\/p>\n

In the two decisions, both adjudicators agreed with the respondent\u2019s interpretation of Section 4(3) and were not persuaded by any of the arguments brought forward by the claimant\u2019s counsel.<\/p>\n

Historically, it has been a widely accepted practice amongst forensic accountants who quantify IRBs to examine a claimant\u2019s last completed taxation year AND<\/u> their pre-accident earnings during the 52 weeks before an accident. \u00a0Examining the claimant\u2019s pre-accident income during the 52 weeks before the accident provides insurers with a more relevant examination period.\u00a0 Also, if a newly self-employed individual had only been operating their business for a few months they would have not yet had a completed taxation year, <\/em>so would they then not have any calculation period available to them?\u00a0 This is indeed where a \u201cblind spot\u201d exists in the SABS.<\/p>\n

The historical practice of completing a 52 week calculation for a claimant\u2019s pre-accident income was borne from a previous version of the SABS, which was not as ambiguous as the current version of the SABS.\u00a0 Outlined in the SABS for accidents on or after November 1, 1996, Section 8(2) provided direction for the calculation of a self-employed individual\u2019s pre-accident income.\u00a0 Specifically, Section 8(2) states:<\/p>\n

\u201cAn insured person who is eligible for an income replacement benefit under paragraph 1 of section 4 and who was self-employed at any time during the four weeks before the accident shall designate one of the following time periods:<\/em><\/p>\n

    \n
  1. The 52 weeks before the accident.<\/em><\/li>\n
  2. The last fiscal year completed before the accident for the business in which the person was self-employed, if the business completed a fiscal year before the accident.\u201d<\/em><\/li>\n<\/ol>\n

    \u00a0<\/em>This iteration of the SABS (i.e. on or after November 1, 1996) is also consistent with the current Application for Accident Benefits (OCF-1), which requests a claimant to select their highest average weekly income from the following options:<\/p>\n