What is the CRA policy on rental claims by a corporation for use of a workspace in a shareholder’s residence (which, in one instance an auditor treated as requiring disclosure of forms T4A, T2200 and T777)? Consider: a monthly payment based on estimated cost reimbursement for costs related to the workspace in the individual’s home; or a reimbursement of actual costs, e.g., of a portion of mortgage interest, property tax, insurance, maintenance, utilities, based on the pro rata square footage usage; or a rental payment. CRA responded:
In general, a monthly rental payment from a corporation to its employee/shareholder would…be meant to compensate an employee/shareholder for costs related to use of office space in the home and would not generally be reported as rental income included on a T776.
In addition, the T2200 and T777 would only apply to situations where the shareholder is also considered an employee of the corporation. …[T]he employee would have to meet the conditions...under subsection 8(13) in order to claim expenses…[which] would be reduced by any payments received from the corporation. …
In each of the examples, a monthly payment based on estimated or actual costs related to a work space in home could be deducted by the corporation, if reasonable in the circumstances. Generally, we would evaluate reasonableness in relation to the actual costs incurred by the shareholder. We would also expect, at a minimum, that the space is needed to file records, book appointments, take business phone calls and perform other administrative functions, as the case may be, and that there is no other space available to the corporation.
If the amount exceeds a reasonable amount, the excess should be reported by the shareholder as a benefit under subsection 15(1). …