For lawyers and law clerks supporting self-employed clients in Statutory Accident Benefits (SABS) claims, Income Replacement Benefits (IRBs) can be one of the most complex benefits to quantify and defend. Unlike salaried employees, sole proprietors or incorporated owners rarely maintain clean accounting, and their reported income often doesn’t tell the full story.

To make a compelling IRB claim that insurers won’t dismiss or undercut, legal teams need to anticipate what matters most:
📌 Proper documentation
📌 Consistent accounting treatment
📌 Credible evidence of business changes post-accident

Here are five key challenges — and how to manage them.

Income Reported on Tax Returns Isn’t Always Enough

Insurers almost always request tax returns (T1 General + Statement of Business Activities or T2125) to verify pre-accident income. But for self-employed clients, this only shows part of the picture — especially if the business is small, cash-heavy, or poorly documented. See our guide on Last Tax Year vs 52 Weeks.

Recommended additional documentation:

Monthly bank statements
GST/HST returns
Invoices and contracts
Business ledgers or accounting software exports (e.g., QuickBooks)

👉 Pro Tip: Organize the above to mirror income reported on taxes. If there are discrepancies, explain them with a reconciliation note or expert letter.

Consistent Treatment of Expenses Pre- and Post-Accident

One of the most common red flags for insurers — and the LAT — is inconsistent expense reporting. If your client excluded Capital Cost Allowance (CCA) from pre-accident income to inflate IRBs, but suddenly includes it post-accident to show business losses, credibility is immediately weakened.

In Eid v. Allstate (2022), the LAT dismissed selective use of CCA and ruled that a consistent approach must be applied to both income periods.

Best practice: Choose a defensible accounting method (e.g., including CCA) and apply it consistently. If changes are made year-over-year, provide an accountant’s letter explaining why and how.

Defacto Ownership ≠ Tax Return Ownership

It’s common for both spouses to be listed as 50/50 owners of a business for tax planning. But when determining who actually earned the income, insurers and the LAT look at defacto ownership — who performed the work.

If your client is the only spouse involved in day-to-day operations and invoicing, then 100% of the income should typically be attributed to them, even if split on the return.

Supporting documents to establish defacto ownership:

Signed contracts with the claimant’s name
Communication logs with clients
Business bank statements
Other documents reflecting the other spouse’s engagement such as employment contract, if spouse is full-time employed with other organization

👉 Clarify this in the initial claim — otherwise, the insurer may reduce the IRB by assuming the claimant was only entitled to 50% of the income.

Salaries Drawn by Owners: Not Arm’s Length

If a business owner pays themselves a “salary” they may consider themselves as an employee. However, in such cases, they are self-employed, and not employed, because they are the controlling mind of a business. Hence, any amounts withdrawn are adjusted while calculating the Net Business Income for the purpose of SABS, since these payments do not represent arm’s-length transactions. arm.

As a result, IRBs must be based on such adjusted net income, not gross salary withdrawn.

Hiring Staff Post-Accident? Back It Up.

Many self-employed clients attempt to maintain their business after an accident by hiring someone to do the work they can no longer perform. While this is a logical mitigation step, it doesn’t automatically establish entitlement to IRBs or post-accident losses.

Insurers will require:

Paystubs or payroll records for the new hire
Payment confirmations (e.g., e-transfers, cheques, invoices)
A clear link between the tasks performed and the claimant’s prior role

If you’re claiming that the post-accident worker replaced your client’s labor, make that connection airtight — especially if seeking ongoing IRBs or business loss support.

Final Thoughts

Building a defensible IRB claim for a self-employed client isn’t about crafting the highest number — it’s about crafting the most credible, consistent, and well-documented number.

Insurers are increasingly forensic in their reviews. Gaps in income records, selective accounting, or unclear business structures won’t just delay the claim — they’ll damage entitlement.

Want support analyzing income, normalizing expenses, or explaining business structures to the insurer?
At Great Oak VFA, we specialize in helping lawyers and clerks prepare bulletproof income loss claims.

The Self-Employed Client: How to Build a Defensible IRB Claim