Principal Issues: 1) Is an annual payment a Bonus or Commission? 2. Does the employer have to ensure the conditions are met before signing Form T2200? 3) How should the 50% principal use condition be determined, specifically, which total hours should be used, the standard workweek or otherwise?
Position: 1) Question of fact. However, in this case, the payment appears to be a bonus. 2) In order for an employee to claim a deduction for home office expenses under either paragraph 8(1)(f) or (i) of the Act, a completed form T2200 is required. Subsection 8(10) of the Act indicates that by signing the form, the employer certifies that the employee meets the conditions set out in the provisions described above. It follows that the best course of action is for the employer to be reasonably certain the employee meets the conditions before signing Form T2200. For the employee to claim the deduction, however, he or she must be able to demonstrate that the requirements of the Act have in fact been met. 3) Although the term "principally" is not defined in the Act, the CRA has accepted the view that it means "more than 50% of the time". With respect to the appropriate "total hours" to use to determine this percentage, it is our view that it would be reasonable to begin with the number of hours that the employee is required to work under the terms of his or her employment contract. Depending on the particular facts, it may be that an employer approves overtime or different working hours, which would have an impact on this calculation. Such a determination involves a finding of fact in each case as to where a particular individual "principally performs the duties of the office or employment".
Reasons: Reading of the legislation and consistent with prior positions.
