Citation: 2010 TCC 112
Date: 20100225
Docket: 2009-1272(IT)I
BETWEEN:
SHAWN VEINOT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Woods J.
[1] The
appellant, Shawn Veinot, was employed in Nova Scotia as
a forestry equipment operator with Looke Cancut Limited for a period of seven
years.
[2] The terms of employment required that the appellant
travel to remote cutting sites with a vehicle suitable for such travel and for
the transportation of equipment. This appeal concerns motor vehicle expenses
incurred by the appellant, most of which relate to traveling between the
appellant’s home and the cutting sites. It was not unusual for the daily round
trip between home and the work sites to be in the neighbourhood of 150 to 250
kilometers.
[3] In the 2005 taxation year, the employer paid to the
appellant an allowance in the amount of $5,470.71 to assist with the motor
vehicle expenses. The allowance, which was based on 16,577 kilometers traveled,
took into account the distance between the appellant’s home and the cutting
sites, subject to a deduction of 50 kilometers for each round trip.
[4] In the appellant’s income tax return, the allowance
was not included in computing income and a deduction was claimed for the full
amount of expenses related to the vehicle. The deduction initially claimed was $15,328,
and the appellant later sought to increase this amount to $18,888.
[5] Included with the income tax return was an application
for a goods and services tax rebate related to these expenses. The rebate is
provided for in section 253 of the Excise Tax Act.
[6] An income
tax reassessment was issued for the 2005
taxation year which disallowed the entire amount of the deduction. The Minister
also disallowed the GST rebate.
[7] The representative of the appellant did not seek to
justify the entire amount of the deduction claimed. She indicated that the
appellant only seeks a deduction for the difference between the actual expenses
incurred ($18,670) and the amount of the allowance ($5,470.71).
[8] The issues are whether the appellant is entitled to a
deduction for motor vehicle expenses and the GST rebate.
Analysis
[9] Under the relevant legislative scheme in the Income
Tax Act, if a taxpayer receives a reasonable allowance from an employer in
respect of motor vehicle expenses for traveling in the course of employment,
the allowance is not required to be included in computing income and the taxpayer
is not permitted a deduction for his expenses.
[10] If, on the other hand, the allowance received was not
reasonable, the allowance is required to be included in income and a deduction
may be taken for the actual employment-related motor vehicle expenses.
[11] The relevant provisions, subsection 6(1) and paragraph
8(1)(h.1), provide:
6(1) There shall be included in computing the
income of a taxpayer for a taxation year as income from an office
or employment such of the following amounts as are applicable
[…]
(b) all amounts received by the taxpayer in
the year as an allowance for personal or living expenses or as an
allowance for any other purpose, except
[…]
(vii.1) reasonable allowances for the use of
a motor vehicle received by an employee (other than an employee employed in
connection with the selling of property or the negotiating of contracts for the
employer) from the employer for travelling in the performance of the duties of
the office or employment,
[…]
and, for the purposes of subparagraphs 6(1)(b)(v),
6(1)(b)(vi) and 6(1)(b)(vii.1), an allowance received in a taxation year by a
taxpayer for the use of a motor vehicle in connection with or in the course of
the taxpayer's office or employment shall be deemed not to be a reasonable
allowance
(x) where the measurement of the use of the
vehicle for the purpose of the allowance is not based solely on the number of
kilometres for which the vehicle is used in connection with or in the course of
the office or employment, or
(xi) where the taxpayer both receives an
allowance in respect of that use and is reimbursed in whole or in part for
expenses in respect of that use (except where the reimbursement is in respect
of supplementary business insurance or toll or ferry charges and the amount of
the allowance was determined without reference to those reimbursed expenses);
8(1) In computing a taxpayer's income for a
taxation year from an office or employment, there may be deducted such of the
following amounts as are wholly applicable to that source or such part of the
following amounts as may reasonably be regarded as applicable thereto
[…]
(h.1) where the taxpayer, in the year,
(i) was ordinarily required to carry on the
duties of the office or employment away from the employer's place of business
or in different places, and
(ii) was required under the contract of
employment to pay motor vehicle expenses incurred in the performance of the
duties of the office or employment,
amounts expended by the taxpayer in the year in respect of
motor vehicle expenses incurred for travelling in the course of the office or
employment, except where the taxpayer
(iii) received an allowance for motor vehicle
expenses that was, because of paragraph 6(1)(b), not included in computing the
taxpayer's income for the year, or
(iv) claims a deduction for the year under
paragraph 8(1)(f);
[12] Counsel for the respondent submits
that the appellant is not entitled to a deduction for motor vehicle expenses because
he received a reasonable allowance and the expenses related to travel between
home and cutting sites are personal expenses. The judicial authorities provided
in support are four decisions of this Court: O’Neil v. The Queen, 2000
DTC 2409, St-Laurent v. The Queen, [2000] TCJ No. 163, Royer v. The
Queen, 99 DTC 683, and Champaigne v. The Queen, 2006 DTC 2368.
[13] The representative of the appellant submits that the
appellant usually reported to work at the head office of the employer before
traveling to cutting sites. That office, which was located in the home of the
owner of the employer, was located one kilometer from the appellant’s home. It is
suggested that this one kilometer was the only personal element of the travel.
[14] The appellant testified that he went to the head
office almost on a daily basis before going to the cutting sites in order to
pick up supplies, maps etc. This testimony was not corroborated by Mrs. Looke,
who was the bookkeeper for Looke Cancut Limited and the spouse of the owner.
[15] I was not satisfied with the appellant’s testimony in
a number of areas and I am not convinced that he went to the Looke head office as
often as he suggested. However, in my view nothing turns on this testimony.
[16] The principle by which travel to work has been considered
to be a personal expense has generally been restricted to situations in which
the taxpayer regularly reports to one or more places of business: McDonald
v. The Queen, 98 DTC 5151 (TCC).
[17] That is not the case here. The appellant’s employment
required him to travel to different cutting locations and none of these could
be considered a regular place of business.
[18] Travel to the cutting sites was in the course of the
appellant’s employment in my view and not a personal expense. None of the
judicial decisions provided by the respondent are inconsistent with this view.
[19] The respondent also submits that a deduction is not
permitted under s. 8(1)(h.1) because a reasonable allowance for motor
vehicle expenses was provided.
[20] I
disagree with this submission because the
allowance was not a reasonable allowance for the employment-related expenses.
[21] The first
reason for this conclusion is subparagraph
6(1)(b)(x). It provides that an allowance is deemed not to be reasonable
if the allowance is not based solely on kilometers. In this case, Mrs. Looke
testified that the allowance was a per kilometer rate but that the rate did
vary depending on things such as whether parts or equipment were being
transported. The deeming rule is applicable here.
[22] Second, the evidence as a whole suggests that the allowance
was not intended to reimburse all employment-related costs. It was only to
provide some assistance.
[23] Third, the allowance excluded 50 kilometers for each
round trip. Mrs. Looke testified that this was on the basis that 50 kilometers
would be allocated to personal expenditures, based on a hypothetical distance
between an employee’s home and the Looke head office. This was an arbitrary
deduction which was not based on the facts of any particular case. For example,
it was not suggested that the deduction was made because employees generally
reported to the Looke head office before going to cutting sites.
[24] There is no principled basis to allocate 50 kilometers
to personal travel.
[25] I conclude, then, that the appellant did not receive a
reasonable allowance and that he is entitled to a deduction for his actual
employment-related motor vehicle expenses. In order to avoid a double claim,
the deduction should take into account the allowance that should have been
included in income, but was not.
[26] The next issue is to determine the amount of employment-related
expenses that were incurred. There is no dispute about the total vehicle
expenses, but if the vehicle was used for both personal and employment
purposes, a reasonable allocation of expenses should be made.
[27] The appellant testified that the motor vehicle was
only used for employment purposes, and that it was suitable only for this
purpose.
[28] The problem that I have with this testimony is that it
is inconsistent with the mileage log that was prepared by Mrs. Looke based on
records provided by the appellant. That log indicates considerably more mileage
on this vehicle than what was claimed by the appellant. The explanations provided
by the appellant for the discrepancies were not satisfactory.
[29] In the circumstances, the appellant has not
established to my satisfaction the amount of vehicle expenses that are
reasonably allocable to employment.
[30] That would be sufficient to justify a dismissal of the
appeal, but in my view that would not be an appropriate result here.
[31] Counsel for the respondent suggested that 62 percent
is a rough allocation of employment use of the vehicle based on the limited
information that is available.
[32] This approach would result in a deduction in the
amount of $6,155.71, after taking into account the allowance. In my view, that
is a sensible approach here.
[33] As for the GST rebate, the respondent suggests that
the rebate should be disallowed because the rebate application did not contain
a statement by the employer as required by section 253 of the Excise Tax
Act. This argument was not mentioned in the reply and I think it would be
unfair for the respondent to raise it for the first time during argument. The
GST rebate should be allowed to take into account employment-related motor
vehicle expenses. This amount is $11,625, which is the aggregate of the
allowance received and the deduction that has been allowed here.
[34] Each party shall bear their own costs.
Signed at Ottawa, Canada this 25th
day of February 2010.
“J. M. Woods”
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