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Docket: 2007-1283(IT)G
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BETWEEN:
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PETER MCCREATH,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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____________________________________________________________________
Appeals heard on common evidence with the appeal of
Peter McCreath (2007-4645(IT)G) on October 8, 2008
at Halifax,
Nova Scotia
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Before: The Honourable Justice Diane
Campbell
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Appearances:
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Counsel for the Appellant:
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P. Robert Arkin
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Counsel for the Respondent:
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Martin Hickey
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____________________________________________________________________
JUDGMENT
Whereas at the commencement of
the hearing, counsel for the Appellant informed the Court that his client
wished to withdraw its appeal with respect to the 2005 taxation year as the
Appellant had not been reassessed an amount as a taxable benefit for this
taxation year;
The appeal from the assessment
made under the Income Tax Act for the 2005 taxation year is
dismissed.
The appeals from
the assessments made under the Income Tax Act for the 2002 and 2003 taxation
years are dismissed, with costs, in
accordance with the attached Reasons for Judgment.
Signed at Ottawa,
Canada, this 30th day of October 2008.
Campbell J.
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Citation: 2008 TCC 595
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Date: 20081030
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Dockets: 2007-1283(IT)G
2007-4645(IT)G
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BETWEEN:
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PETER MCCREATH,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Campbell J.
[1] These appeals are
from assessments under the Income Tax Act (the “Act”) and the
years that are before me are the Appellant’s 2002, 2003 and 2004 taxation
years. The issue is whether the Appellant must include in income amounts paid
to him by his employer, the Nova Scotia Liquor Corporation (the “NSLC”) in
each of these taxation years for travel between his home office in Hubbards, Nova Scotia and the NSLC office
located at Chain
Lake Drive,
Halifax, Nova
Scotia.
The Minister of National Revenue (the “Minister”) reassessed the Appellant to
include these amounts as taxable benefits pursuant to subsection 6(1) of the Act.
At the commencement of the hearing, counsel for the Appellant withdrew the 2005
taxation year as the Appellant had not been reassessed an amount as a taxable
benefit for this taxation year.
[2] The Appellant was
initially appointed Chairman of the NSLC in 2001. He is also a member of the
Board of Directors of NSLC. The NSLC head office is located at Chain Lake Drive in Halifax. At this location the
NSLC maintains an office for the Appellant. The NSLC does not require him to
keep a home office; however, he performed most of his duties as Chairman from
his home office in Hubbards. From the home office he also operated PMC Communications
Inc., his main business and principal source of income. This home office was
fully equipped by PMC Communications Inc. He testified that he worked
approximately two hours per day on his duties as Chairman from his home office.
In addition, he travels once or twice weekly to the NSLC head office, spending
about two hours weekly on duties which cannot be performed at his home office.
During these trips to the NSLC office he meets with the President, board
members, attends meetings and signs documents. Approximately 70% of his duties
as Chairman are performed at his home office with a smaller percentage (10% at
NSLC head office and 20% at other locations, meeting with industry officials
and suppliers) of the total time spent at the NSLC head office or elsewhere at
industry events at breweries and wineries. Because he seldom used his NSLC
office, he advised the NSLC that they could use his office when they needed it.
[3] The Appellant
agreed with all of the assumptions (b) to (o) in the Minister’s Reply to the
Notice of Appeal with the exception of (e), (f), (g) and (o).
(1) With respect to (e),
which stated:
the
Appellant performed his duties as the Chairman of the Board of Directors for the N.S.L.C. at the Office;
(meaning the NSLC head
office) the Appellant disagreed with this assumption and testified that he
seldom used the office which NSLC provided for him.
(2) With respect to (f) which stated:
at
all material times, the Appellant attended the N.S.L.C.’s directors meetings at
the N.S.L.C.’s head office;
and
(g) which stated:
at
all material times, the Appellant attended meetings in downtown Halifax, Nova Scotia as part of his duties
as the Chairman of the Board of Directors for the N.S.L.C.;
he
qualified these two assumptions by stating that he attended meetings not only
at the NSLC head office but also elsewhere, for example, in respect to industry
events.
(3) With respect to (o), which stated:
the Appellant did not report the amounts of $1,201 and
$3,332, in his income for the 2002 and 2003 taxation years, respectively.
he
qualified this assumption by stating that he did not report these amounts as he
did not consider the amounts to be income.
[4] On
cross-examination, the Appellant testified that the hours devoted at his home
office to his personal corporate business activities and those of the NSLC were
co-mingled and that he “did the work as it came in”. He also stated that he did
not use the NSLC office due to the distance from his home – it was
approximately 55 kilometres away. In addition, there was no requirement that he
perform his duties from the NSLC head office. It was more convenient to work
from the home office.
[5] The Appellant was paid a
per kilometre allowance when he travelled between the NSLC head office and his
home office. The issue in these appeals arises because the Appellant did not
include these amounts in his income when he filed his personal tax returns in
the relevant taxation years. The Minister’s position is that these amounts are
personal or living expenses that were received in respect of his office with
the NSLC and that he did not receive the amounts from NSLC for travelling in
the performance of his duties at NSLC.
[6] The Appellant’s position
is that the Appellant’s home office is his main base for conducting his
activities as Chairman of NSLC. While NSLC makes an office available, most of
his duties as Chairman are performed from his home office, making it a regular
place of work in connection with these duties. Therefore, the expenses incurred
by the Appellant were related to the use of his vehicle to travel from one
regular workplace to another.
Analysis:
[7] It is well established
that the cost of travel from a taxpayer’s home to his place of work will be
considered personal expenses which will therefore not be deductible. The
leading case, which supports the proposition that such travel expenses will not
be considered to be incurred in the course of a taxpayer’s work duties, is Ricketts
v. Colquhoun, [1926] A.C. 1 (U.K. H.L.).
The Federal Court of Appeal reiterated the same principle in Hogg v.
Canada, [2002] 4 F.C. 443.
[8] The caselaw has
established that there may be some exceptions to this general proposition. The
Appellant relied on two cases: Campbell et al. v. The Queen, 2003
DTC 420, and Toutov v. The Queen, 2006 DTC 2928, to support his
position. However, upon reviewing these decisions, I see important differences
which distinguish them from the appeals before me.
[9] In the Campbell case, J. Margeson found
that travel allowances, paid to the taxpayers to travel to their Board meetings
at the School Board, were not personal expenses and that they were therefore
exempt from inclusion in income under subsection 6(1). Although Appellant
counsel referred to one fact as being the only difference between the present
appeals and the Campbell decision, I consider this one factor to be a key
difference. The fact that no office was maintained at the School Board for the
Appellants’ use as a member of the School Board distinguishes this case
from the present appeals. Although J. Margeson does not claim it was
critical to his decision, it was important according to his statement at
paragraph 9 when he referenced the maintenance of a home office as being of
great assistance to him. In addition, the evidence in Campbell suggests that a portion
of the Appellants’ residences were kept separate and dedicated solely to
conducting School Board activities.
[10] In the present
appeals, the Appellant’s home office was used the majority of the time in
conducting his personal business and not the NSLC activities. The home office
was equipped by his business and most importantly NSLC maintained an office for
his use in Halifax.
[11] Similarly in Toutov,
the employer in that case did not maintain an office for the taxpayer. The
employer also required the taxpayer to travel to visit clients but because of
the flexibility the employer was allowing the taxpayer in working from his home
in Kingston, the taxpayer was
expected to cover travel costs to Ottawa and Carleton Place to meet clients. The decision in Toutov
found that the real base of operations was in the Appellant’s home. In the present
appeals, the real base of operations for NSLC was not the Appellant’s home
office. NSLC maintained an equipped office for the Appellant. The Board
meetings were held at the NSLC headquarters as were the Appellant’s meetings
with the President and the staff. The evidence never suggests that NSLC
requested that the Appellant maintain his home office. It was entirely the
Appellant’s decision to do so and it was a decision based on convenience. He
spent approximately 6 to 7 hours daily on his personal business activities
while the average of 1 to 2 hours daily spent on NSLC activities were
co-mingled with these other personal activities.
[12] I do not believe
that the decisions in Campbell and Toutov can be extended to
cases, such as this, where a taxpayer makes a personal decision to work from
home when the employer has provided and maintains a regular office for his use.
The facts in the Campbell and Toutov decisions are substantially
different from those facts in the present appeals. I consider it irrelevant
that the Appellant permitted NSLC staff to use his NSLC office when he was not
there and to allow NSLC to relocate his office within the building on three
occasions. This has no bearing on the fact that the Appellant made a choice to
work from his home office instead of the office maintained by NSLC for him in
his position as Chairman. His home office cannot be considered an extension of
the employer’s office and therefore the travel expenses cannot be said to be
incurred in travelling from one place of work to another. The Appellant’s
travel was from his home base, where he chose to conduct the majority of his
duties as Chairman of NSLC, as a matter of convenience, to his place of work at
NSLC headquarters.
[13] In summary, I
believe that the Campbell and Toutov decisions establish
exceptions in certain circumstances to the basic proposition that a taxpayer
will not be permitted to deduct travel expenses when travelling from home to
the workplace or vice versa (Ricketts supra and Hogg supra).
However, I do not believe they extend to a situation where a taxpayer makes a
choice of his own volition to do a portion or all of the work duties in a
location separate from where his work is actually located. The Appellant’s
choice to use the home office and not the NSLC office for conducting most of
his activities as Chairman was strictly one of convenience for the Appellant
and, fortunately for the Appellant, NSLC placed no limitations or restrictions
on the Appellant’s choice.
[14] The appeals in
respect to the 2002, 2003 and 2004 taxation years are dismissed, with costs,
because the Minister was correct in concluding that the amounts received in
each of the taxation years from NSLC were taxable benefits pursuant to
subsection 6(1) of the Act.
Signed at Ottawa, Canada, this 30th day of October 2008.
Campbell J.
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