The Canada Revenue Agency’s May 2026 CALU roundtable answer declined to revisit an old rule. Asked whether it would reconsider its views on subsections 15(1), 56(2) and 246(1) where a corporation owns and pays for a policy but a different taxpayer is the beneficiary, the CRA said no. Its reason: whether a benefit has been conferred is a question of fact. For holders of corporate-owned life insurance, that answer shifts the audit focus from the deduction claimed to the designation on file, and it rests on a roundtable document that carries its own disclaimer.
This analysis explains why the answer matters, how policyholder, premium payor and beneficiary are separate roles, and why the designation on file is the exposure. It then covers what the CRA said and did not say, why “question of fact” matters more than any rule of thumb, Harding and Gestion M-A Roy, the practitioner disagreement on section 246(1), how the benefit is measured and taxed, the employee variant, post-2016 adjusted cost base rules, a pre-anniversary review, and where this leaves owners and their advisors.
This is general information, not tax, legal or accounting advice. Confirm structure and any actions with your accountant and tax lawyer.
At its 5 May 2026 roundtable, CALU asked whether the CRA would reconsider its views on subsections 15(1), 56(2) and 246(1) where a corporation is policyholder and premium payor and a different taxpayer is the beneficiary. The CRA answered “No.” Its reason was factual rather than technical: whether a benefit has been conferred is a question of fact. No blanket safe harbour exists for any structure.
That answer sits in a document stating it “may not represent the current position of the CRA.” Treat it as a roundtable answer, not a ruling you can rely on for your own file.
The practical consequence for business owners: whether the CRA has an interest in beneficiary designations is no longer the question. Whether the beneficiary designation on your corporate-owned life insurance is defensible is. General information only, not tax, legal or accounting advice; confirm structure and any action with your accountant and tax lawyer.
In a corporate owned life insurance arrangement, the corporation usually holds the policy and pays the premiums, while the beneficiary may be the corporation, a shareholder, or a shareholder’s family member. The exposure arises only where the corporation is both policyholder and premium payor and someone else is the beneficiary. Where the corporation is also the beneficiary, the death benefit flows to it, not to a different taxpayer.
The designation is its own document with its own terms, revocation rights and insurer forms. The policyholder can change it unless an irrevocable designation constrains that right. Because naming a beneficiary is handled administratively at issue, designations drift from the tax reasoning behind the structure.
Each role can sit with a different party in a multi-corporation group. That divergence is exactly what the CRA answer addresses.
That three-role split explains where the risk actually sits. Most owners assume it lives on the deduction side: premium deductibility, taxability of the death benefit, capital dividend account availability. The CRA’s roundtable answer declining to reconsider its views turns attention elsewhere: who is named, and in what capacity, on the designation the insurer holds.
In the case law, the benefit is measured by premiums the corporation paid in relation to someone else’s designation, not by anything the corporation deducted. The designation drives the finding. A file can be sound on the deduction side and still carry exposure, because nobody has revisited the designation since issue, a drift familiar from segregated funds versus mutual funds in Ontario planning. Insurance-sector commentary treats a non-owner beneficiary as a known issue for closely held clients; that framing is sales-oriented, so treat it as context, not authority.
The question was framed precisely: where the corporation is policyholder and premium payor and the beneficiary is a different taxpayer, would the CRA reconsider its views on subsections 15(1), 56(2) and 246(1)? The answer was no, tied to the observation that whether a benefit has been conferred is a question of fact.
Three gaps remain: no commitment to audit every such policy, no premium threshold, and no formula owners can apply to their own numbers. Nor did the answer resolve which provision applies in a given structure; listing three is itself a signal that the analysis is layered rather than mechanical.
Reading a document against its own disclaimer is a habit worth applying across a corporate file, including what group benefits really cost a GTA employer in year one. The document states it may not represent the current position of the CRA. Verify the current text and any subsequent guidance before acting.
That answer shifts the work from interpretation to evidence. A question of fact means the outcome turns on the specific file: the roles each party holds, who paid the premiums, whose life is insured, and who is designated. Documentation is therefore the deliverable. Corporate resolutions, policy applications, designation forms, premium payment records, and any shareholder or buy-sell agreement all feed the analysis. Two policies with near-identical face amounts can land differently because of the beneficiary named and how premiums were recorded in the corporation’s books. No rule of thumb survives this test: “family members are always fine” and “premiums are always a benefit” are both too broad. The honest conclusion is unresolved uncertainty, which is why the action item is a professional review, not a self-assessment. The cases that follow are best read as illustrations of that test, not exceptions to it.
The fact-based test has a concrete reference point. In Harding (2022 TCC 3), the Tax Court confirmed a shareholder benefit under s. 15(1) equal to the pro rata share of premiums the corporation paid that related to beneficiary designations in favour of family members. The court attributed no benefit to the corporation for the share tied to its own beneficiary interest, so quantum turns on apportionment: exposure tracked the portion of coverage benefiting someone other than the corporation. As with any corporate-paid arrangement, the tax treatment is a choice you make upfront, and Harding shows the designation is part of it. Harding is a Tax Court decision, not a binding rule for every fact pattern; apply it by analogy. The extracts reviewed here were truncated, so confirm the full text before relying on any detail of the reasoning.
Harding turned on who within the family was named; Roy turned on which entity in the group was. In Gestion M-A Roy (2022 TCC 144), a s.15(1) benefit arose for a holding company where an operating subsidiary in the same group was the revocable beneficiary and paid the premiums on corporate-owned life insurance.
The court also found a s.246(1) benefit for a second holding company, related to that subsidiary but not a shareholder of it. That second finding is the part practitioners dispute most, so treat it as contested rather than settled.
The Federal Court of Appeal affirmed in 2024 (2024 CAF 16), so scrutiny is not confined to one corporation holding its own policy. Read Roy as a warning about multi-entity structures.
The extract reviewed here was partial; verify the reasons and the appellate disposition before quoting specifics.
The Roy decision’s s.246(1) branch is contested, not settled. Some practitioners argue publicly that applying s.246(1) to a holdco-owned, opco-beneficiary structure is wrong, and that position remains live. No settled rule holds that a second corporation necessarily faces a s.246(1) benefit on those facts.
For owners, that means “which provision applies?” may turn on entity relationships rather than on the insurance itself. Where an advisor or an article states a flat conclusion on s.246(1), treat it as a position to test with your tax lawyer, not a rule to plan around.
This piece takes no side. It flags the dispute because a structure review that ignores it may miss the exposure.
The dispute over which provision applies does not change how the resulting benefit is generally quantified. Practitioner commentary puts the measure at the premiums paid, included in the shareholder’s income each year rather than deferred until the policy pays out. No corresponding corporate deduction offsets those premiums, so the amount is added to the shareholder’s income without a matching corporate reduction. Because inclusion is annual, exposure can accumulate across the life of an unchanged policy instead of surfacing only at a claim or a reorganization. In Roy, the benefit findings were the point, and structure drove the outcome: which entity owned the policy, which paid, and which was beneficiary. These are practitioner summaries of tax and corporate considerations, not statutory formulas. Confirm the computation and the years of inclusion with your accountant before treating any figure as settled.
Those mechanics change where the beneficiary is not a shareholder. Where a non-shareholder employee names a related party, practitioner commentary characterizes the premiums as a taxable employment benefit to the employee rather than a shareholder benefit. The corporation may then be able to deduct the premiums, the opposite corporate result. The distinction turns on who receives the benefit, not the face amount or the premium size.
The same fact-based test governs, so employment status, shareholding, and the relationship between employee and beneficiary all matter. Group arrangements raise parallel questions about who benefits; A plan that works for both sides of the table shows how those structures are built.
Confirm the characterization with your accountant. This piece does not apply the rules to your facts.
The employee variant turns on who receives the benefit; the adjusted cost base question turns on something else entirely. Since the 2016 changes, at least one practitioner has described the ACB treatment where a corporate beneficiary exists as producing a double-counting effect. Treat that as opinion published on a practitioner blog, not a primary-source finding, and not settled law.
The practical point is narrower and more durable: a beneficiary designation interacts with more than one part of the tax calculation. It is not confined to the shareholder benefit rules. Whether the ACB rules and a shareholder benefit finding interact on your file is a question to put to your accountant and tax lawyer, not one to resolve by reading.
Flagging this as unresolved is more useful than asserting a conclusion the available sources do not support.
That unresolved interaction is one more reason to hand the file to your accountant. The recommendation here is to review beneficiary designations before your next policy anniversary, not after a CRA assessment. That timing is practical, not a sourced deadline.
Confirm the policyholder, premium payor and current beneficiary as they appear on the insurer’s file, not as you remember them. Designations shift when policies are assigned or advisors move. Compare the designation against the original tax reasoning and against any shareholder agreement, buy-sell arrangement or estate plan that assumed someone else.
Ask your accountant and tax lawyer to confirm the characterization, including whether s.246(1) applies in a multi-corporation structure or the employee variant is in play.
Bring documents, not descriptions: applications, designation forms, corporate resolutions and premium records. The same document-first discipline applies in our benefits booklet audit.
Insurance advice and tax advice sit with different professionals. An independent review can coordinate the insurance file with those conclusions, but not replace them. Van Scheltinga Financial Services works with corporate-owned life insurance and does not provide tax or legal advice.
That hand-off keeps the insurance file and the tax conclusion in their proper lanes. Pull the current beneficiary designation from the insurer and read it as a tax document, not an administrative form. Separate the three questions on your file: who owns the policy, who pays the premiums, and who is named as beneficiary. The exposure lives in the third answer. If the corporation pays and someone other than the corporation is designated, put those facts in front of your accountant and tax lawyer and ask for a written characterization, including any s.246(1) question in a multi-corporation group. Do not rely on the May 2026 roundtable answer as a safe harbour: the document itself says it may not represent the CRA’s current position, and the test remains a question of fact. Reviewing before the next policy anniversary makes any change a planning decision rather than a response to an assessment. This article is general information only and is not tax, legal or accounting advice. Confirm structure and any action with your accountant and tax lawyer.
The beneficiary designation is not paperwork; it is a tax document. Keep the three roles separate: who owns the policy, who pays the premiums, and who is named as beneficiary. If the corporation pays and someone else is designated, the exposure is real, and the CRA roundtable answer is not a safe harbour. The analysis remains a question of fact, with possible s.15(1) and s.246(1) issues for shareholders and multi-corporation groups.
Next, pull the current designation from the insurer and put the facts in front of your accountant and tax lawyer for a written characterization. An independent review through Van Scheltinga Financial Services can coordinate the insurance file with those conclusions, though tax and legal advice sit with your own professionals. Review before your next policy anniversary, and make the change a planning decision, not a response to an assessment.
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