Principal Issues:
1) Can an employee earning salary (with no commission income) deduct amounts paid to a self-employed assistant (i.e., assistant is not an employee)?
2) Can a commissioned employee deduct amounts paid to a self-employed assistant?
3) With respect to Form T2200, Question 9 asks: "Did you require this employee under a contract of employment to pay for a substitute of assistant?" In situations 1) and 2) above, is the question required to be answered "Yes" in order for the employee to deduct expenses relating to the assistant?
Position:
1) No.
2) Yes.
3) N/A for situation 1) and 2) above.
Reasons:
1) Subparagraph 8(1)(i)(ii) of the Act allows a taxpayer to deduct amounts paid in the year to an assistant or substitute. Where the assistant is a bona fide self-employed individual, the employee would not have paid the assistant "salary" for purposes of subparagraph 8(1)(i)(ii), as he was not the assistant's "employer".
2) If the employee were remunerated in whole or in part by commission, he would be permitted to deduct amounts paid to a self-employed assistant provided each of the conditions of paragraph 8(1)(f) were met.
3) Where an employee is non-commissioned, Q. 9 of the T2200 should ordinarily be answered in the affirmative in order to receive a deduction under subparagraph 8(1)(i)(ii). Here, no deduction is available. Where an employee is commissioned, this question should not be completed (the form specifically states: "Do not complete for employees earning commission income").
