15 December 2014 Internal T.I. 2014-0544121I7 F - Chantier particulier -- translation

Principal Issues: Is a taxpayer considered to be performing duties of a temporary nature for the purpose of subparagraph 6(6)(a)(i)?

Position: Yes until XXXXXXXXXX.

Reasons: Question of fact.

December 15, 2014

Western Quebec Tax Services Office
Tax Rulings Directorate
Section I
Business and Employment Income
For the attention of Sylvie Guérette, I. Landry, M. Fisc.
Trust Accounts Compliance Officer

2014-054412

Special work site- temporary work

This memorandum follows our telephone conversation (Guérette/Landry) in which you asked whether the work performed by XXXXXXXXXX (the "Taxpayer") was of a temporary nature within the meaning of subparagraph 6(6)(a)(i) of the Income Tax Act (hereinafter, the "Act").

FACTS

The Taxpayer worked for XXXXXXXXXX (the "Employer"). The Taxpayer's history of work with the Employer that is relevant to the purposes hereof is as follows. The Taxpayer first obtained a fixed-term employment contract for the period XXXXXXXXXX to XXXXXXXXXX in order to occupy the position of XXXXXXXXXX at a particular work site (the "Worksite").

Then, on XXXXXXXXXX, the Taxpayer received a hiring letter for an indefinite period for the position of XXXXXXXXXX at the Worksite, effective on XXXXXXXXXX. According to the facts provided to us by the parties, this contract was awarded to the Taxpayer in order to eliminate a backlog in work. The contract was therefore to be terminated as soon as the backlog was eliminated.

On XXXXXXXXXX, the Taxpayer received a letter of termination from XXXXXXXXXX. This termination was due to a suspension of work at the Worksite.

However, the Employer canceled this termination on XXXXXXXXXX with an effective date of XXXXXXXXXX. The Employer decided to retain the Taxpayer because the XXXXXXXXXX at the Worksite was temporarily and unexpectedly transferred to another work site, but with a promise to return to the Worksite at the beginning of XXXXXXXXXX.

The return of XXXXXXXXXX to the Worksite was delayed and finally occurred on XXXXXXXXXX. The Employer nevertheless kept the Taxpayer employed since XXXXXXXXXX was not certain to remain working at the Worksite.

The taxpayer was confirmed in his post on XXXXXXXXXX since the XXXXXXXXXX XXXXXXXXXX had definitively left the Worksite.

At the end of XXXXXXXXXX, the Taxpayer received a verbal notice that the termination of the Worksite was scheduled for XXXXXXXXXX.

All statutory references to a statutory section or other provision in this letter are to a section or other provision of the Income Tax Act.

OUR COMMENTS

Subject to certain conditions, subsection 6(6) inter alia permits a taxpayer in computing income to not include any amount received that represents the value of, or an allowance (not in excess of a reasonable amount) in respect of, expenses the taxpayer has incurred for the taxpayer’s board and lodging for a period at a special work site, being a location at which the duties performed by the taxpayer were of a temporary nature.

In addition, subsection 6(6) permits there to not be included in a taxpayer’s income an amount received in respect of the period described below during which the taxpayer received board and lodging, or a reasonable allowance in respect of board and lodging, for transportation between the taxpayer's principal place of residence and the special work site.

Although the Act does not define "temporary", our position in this regard is set out in paragraph 6 of Interpretation Bulletin IT-91R4, Archived, Employment at Special Work Sites or Remote Work Locations ("Bulletin"). As a general rule, duties will be considered to be of a temporary nature if it can reasonably be expected that they will not provide continuous employment beyond a period of two years. The determination of the expected duration of employment must be made on the basis of the facts known at its commencement. It is possible, however, that an employment of a duration of more than two years without possibility of extension may, after the analysis of all the facts of a particular situation, also be regarded as work of a temporary nature.

In this regard, the following factors should be considered:

• the nature of the duties to be performed by the employee (certain types of work are, by their nature, short term engagements, such as repair work or trades which are involved only during a certain phase of a project);
• the overall time estimated for a project, or a particular phase of a project, on which the employee is engaged to perform duties; and
• the agreed period of time for which the employee was engaged according to the employment contract or other terms of the engagement.

Consideration should also be given, inter alia, to the possibility that the employment contract may be renewed and evidence of an intention to work there temporarily or otherwise.

As indicated in the Bulletin, should these factors change after employment commences, it may be necessary to redetermine whether the duties undertaken by the employee are considered to be of a temporary nature for the purposes of the special work site exclusion.

According to these guidelines and the facts provided by the parties, we are of the view that the work done by the taxpayer was temporary work until XXXXXXXXXX. The factors changed from XXXXXXXXXX. Consequently, we consider that the work lost its nature of temporary work from that date onwards. Moreover, the announcement of the end of the Worksite made after XXXXXXXXXX does not change this conclusion.

We trust that these comments will be of assistance.

Michel Lambert, CPA, CA, M. Fisc.
Manager
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch