30 November 2009 Internal T.I. 2009-0337751I7 - Work space in home

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: With respect to subparagraph 8(13)(a)(ii) of the Act and the completion of question 10 of the Form T2200, does an employer have to require an employee to use the home office "exclusively" for employment-related purposes and what does "meeting clients" and "regular and continuous" mean?

Position: Whether an employee uses the home office exclusively for employment-related purposes is a determination of fact. There is no requirement in subparagraph 8(13)(a)(ii) that an employer stipulate, in an employment contract or otherwise, that the employee's home office be used exclusively for employment-related purposes. See letter for discussion of meaning of other terms.

Reasons: The Act, IT-514

		2009-033775
XXXXXXXXXX 	Renee Sigouin
(613) 957-2128
November 30, 2009

Dear XXXXXXXXXX :

Re: Work space in home

We are writing in response to your email dated August 20, 2009 wherein you requested our comments in relation to the completion of question 10 of Form T2200, "Declaration of Conditions of Employment" ("T2200") in relation to work space in home expenses.

Form T2200 is a multi-use form required under the Income Tax Act (the "Act") that must be certified by an employer to support an employee's deduction of various expenses, including those relating to a home office. The view of the Canada Revenue Agency ("CRA") on the deductibility of home office expenses is explained in Interpretation Bulletin IT-352R2, Employee's Expenses, Including Work Space in Home Expenses ("IT-352R2"), which is available on the CRA Web site at www.cra.gc.ca/E/pub/tp/it352r2.

In order for an employee to deduct expenses related to a home office, the expense must be deductible under paragraphs 8(1)(f) or (i) and satisfy the additional requirements outlined in subsection 8(13) of the Act. As outlined in paragraph 2 of IT-352R2, to deduct home office expenses under subsection 8(13), the work space must either be:

(a) the place where the individual principally (more than 50% of the time) performs the office or employment duties (i.e., pursuant to subparagraph 8(13)(a)(i) of the Act); or

(b) used exclusively during the period to which the expenses relate to earn income from the office or employment and, on a regular and continuous basis, for meeting clients or other persons in the ordinary course of performing the office or employment duties (i.e., pursuant to subparagraph 8(13)(a)(ii) of the Act).

In addition, the individual may only deduct the expenses related to the home office to the extent that they do not exceed the income for the year from the office or employment as determined before deducting these expenses.

The purpose of question 10 on Form T2200 is to determine on a prima facie basis whether an employee has met the conditions outlined in subsection 8(13) of the Act and therefore requires employer confirmation that either condition (a) or (b) above has been satisfied. We understand that you would like our comments on the meaning of various terms used in subparagraph 8(13)(a)(ii) of the Act that are referred to in condition (b) above and question 10 of Form T2200.

Specifically, you have asked whether an employer must require, under a contract of employment, that an employee use the home office exclusively for employment-related purposes in order to respond affirmatively to question 10 of the form. We note that there is no requirement that the exclusivity of use of the home office for employment-related purposes be required by an employer or stipulated in the employee's contract of employment for purposes of subparagraph 8(13)(a)(ii) of the Act. Accordingly, the employee's home office may be used exclusively for employment-related purposes by choice such that the condition may be satisfied. Whether an employee's home office has been used exclusively for this purpose will be a determination of fact.

Form T2200 is identified by subsection 8(10) of the Act as the prescribed form that must be signed by an employer in order for an employee to claim deductions for employment-related expenses under various provisions of the Act, including paragraphs 8(1)(i) and (f). The words of subsection 8(10) of the Act indicate that by signing the form, the employer certifies that the required conditions set out in the provisions described above are met. It follows that the best course of action is for the employer to be reasonably certain that an employee meets the conditions before signing the form. For employees to claim the deduction, however, they must be able to demonstrate that the requirements of subsection 8(13) of the Act have in fact been met.

You have also asked what is meant by the terms "regular and continuous basis" and "meeting clients or customers" as stated in question 10 of Form T2200 and referred to in condition (b) above. Whether a taxpayer meets clients or customers at the home office on a regular and continuous basis is a determination of fact. The meaning to be accorded to "regular and continuous" as stated in subsection 8(13) of the Act for the purpose of computing employment income would be similar to that given to this same expression in subparagraph 18(12)(a)(ii) of the Act for the purpose of computing business income. The CRA's position on the interpretation of the expression "regular and continuous" in subparagraph 18(12)(a)(ii) is set out in paragraph 3 of Interpretation Bulletin IT-514, "Work space in home expenses", as follows:

"The second requirement is that the workspace must be used for meeting clients, customers or patients on a regular and continuous basis. The regularity and frequency of meetings in a workspace to meet the requirement of being on a regular and continuous basis will depend on the nature of the business activity and is determined on the facts of each situation. However, a workspace in respect of a business, which normally requires infrequent meetings or frequent meetings at irregular intervals, would not meet the requirement."

Although the Act does not specify what is meant by "meeting clients", the Oxford Canadian dictionary defines "meeting" as "an assembly of people and defines "meet" as: " a. encounter (a person or persons) by accident or design; come face to face with, b. (two or more people) come into each other's company by accident or design". It is our view that this traditional interpretation that meetings refer to those held in person would apply to the interpretation of subsection 8(13) of the Act.

We trust that these comments will be of assistance.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch