As of April 1, 2013 HST no longer applies to legal fees and legal services in BC. In personal injury cases no income tax is payable on lawyer negotiated settlements for pain and suffering compensation with the Insurance Corporation of British Columbia, ICBC, and other insurance companies. The Provincial change back to the PST and GST changes will however keep sales and services taxes on legal fees at a total of 12%, with few exceptions.
According to the Provincial Sales Tax, PST, Bulletin of March 28, 2013, an injury claimant that hires a BC lawyer to represent them in an insurance dispute that relates to a motor vehicle accident in BC must pay the tax on legal services because they relate to a possible BC proceeding. This applies even if the matter is settled out of court.
Claimants and all BC government departments and Crown corporations, including ICBC, that were paying HST on purchases of taxable goods and services will have to pay GST. Businesses that already have a federal business number can use the old business number for the GST, but will still need a new PST number.
The change from the HST back to the PST/GST will not have any substantial impact on what the average personal injury litigant pays for sales and services taxes on legal services. Talk to your lawyer about the specifics of your case.
Posted by Personal Injury Lawyer Mr. Renn A. Holness, B.A. LL.B.