Citation: 2007TCC451
Date: 20070803
Docket: 2006-2313(IT)I
BETWEEN:
KAREN HENRY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bowman, C.J.
[1] These appeals are
from assessments for the appellant’s 2002 and 2003 taxation years. In those
years the appellant claimed home office expenses and automobile expenses in
connection with her work. She did not pursue her claim for home office expenses
but she did argue that she was entitled to automobile expenses beyond the
amounts received from her employer.
[2] The appellant is a
social worker employed by the Peel Regional Municipality. She makes home visits to persons
who are on social assistance or are claiming social assistance. For this
purpose she is required to use her automobile.
[3] In her return of
income for 2002 she claimed automobile expenses (fuel, maintenance, insurance,
licence and registration and capital cost allowance) of $10,831.40. This figure
was based on her calculation that total kilometres driven in the year were 29,100
of which 27,200 kilometres were for business use
27,200
29,100 X 11,588 = $10,831.40
[4] The 2003 return was
not put in evidence but the appellant informed me that the figures were
substantially the same in 2003.
[5] I do not regard the
figures in her return as particularly reliable. The return was prepared by
someone else and seems to have been prepared without adequate consultation with
the appellant. For example, she agreed on cross-examination that she drove
every day from her home in Scarborough and Brampton a distance of 40 kilometres, or 80
kilometres per day and 400 per week. This would account for about 19,000
kilometres per year. Expenses of travelling to and from work are not
deductible. O’Neil v. The Queen, 2000 DTC 2409, [2001] 1 C.T.C. 2091; Ricketts
v. Colquhoun, [1926] A.C. 1.
[6] The appellant did
claim automobile expenses from her employer on the basis of 40.5¢ or .41¢ per
kilometre. The amounts claimed were always paid by the employer but they were
only a small fraction of the total claim made in her income tax return of
27,200 kilometres. If she had claimed and been paid for 27,200 kilometres
it would have worked out to over $11,000.
[7] Paragraph 8(1)(h.1)
of the Income Tax Act reads as follows:
(1) In computing a taxpayer’s income for
a taxation year from an office or employment, there may be deducted such of the
following amounts as are wholly applicable to that source or such part of the
following amounts as may reasonably be regarded as applicable thereto:
. . . . .
(h.1) where the taxpayer, in the
year,
(i) was ordinarily required to carry on
the duties of the office or employment away from the employer’s place of
business or in different places, and
(ii) was required under the contract of
employment to pay motor vehicle expenses incurred in the performance of the
duties of the office or employment,
amounts expended by the taxpayer in the
year in respect of motor vehicle expenses incurred for travelling in the course
of the office or employment, except where the taxpayer
(iii) received an allowance for motor
vehicle expenses that was, because of paragraph 6(1)(b), not included in
computing the taxpayer’s income for the year, or
(iv) claims a deduction for the year
under paragraph (f);
[8] I think the
existing state of the law is that receipt of a tax free allowance for motor
vehicle expenses, as provided in subparagraph 8(1)(h.1)(iii), is not an
absolute bar to claiming additional motor vehicle expenses if the amount
reimbursed is unreasonably low in relation to the amounts actually incurred.
[9] In Evans v. R.,
99 DTC 168, Porter D.J. said:
[23] However, the argument advanced by
the Minister that such an allowance acts as a bar to a claim for expenses
relating to different travel not covered by that allowance, could lead to
absurd results, which clearly would not be within the contemplation of the
legislation and is not supported by the case law on the issue. Say for example,
the taxpayer was required as part of his or her employment to drive his own
vehicle some 40,000 kilometres in a year and for whatever reason was only
reimbursed by the employer for 100 of those 40,000 kilometres. Could it be
said, that allowance should act as a bar to claiming as an expense against the
employment income, the cost of travelling the remaining 39,900 kilometres. That
would be an absurd result, which should be avoided. The allowance might be
perfectly reasonable as it relates to the travel for which it was paid but it
should have no bearing upon the travel for which it was not paid.
[24] The same principle was dealt with
in the Rozen case (above), that if a taxpayer is required to use his
vehicle for employment purposes, both within a city and outside the city, but
is only reimbursed for travel outside the city by way of a non taxable
allowance under subparagraph 6(1)(b)(vii.1), that taxpayer is still
entitled to claim his or her expenses against employment income, for the travel
within the city, as long as it meets all the other relevant criteria.
[25] In my view, the section makes
complete and adequate sense if given the interpretation that if a taxpayer
receives an allowance for motor vehicle expenses which, by reason of paragraph 6(1)(b),
is not included in his or her taxable income, he or she can claim no further
amounts in respect of motor vehicle expenses expended with respect to that same
travel (unless "woefully inadequate" as per the Mina case
above), even if the actual expenses exceeded the allowance for that travel.
However, if he or she incurs expenses for travel, other than that covered by
the allowance, done in the performance of duties under the contract of
employment, express or implied, then the existence of that allowance is not a
bar to a claim to set off those other expenses against employment income
pursuant to subparagraphs 8(1)(h.1)(i) and (ii). In short, the exception
under subparagraph 8(1)(h.1)(iii) relates only to the expenses of travel
for which the allowance was paid and is not a bar to a claim for expenses
relating to travel for which it was not paid.
[26] I am fortified in this approach by
the words of Strayer, J. in the Rozen case (above) where at page 52 he
says:
The fact that there was some
reimbursement based on a mileage rate fixed by the employer, with respect to
out-of-town use does not prevent the taxpayer's automobile expenses from being
within subparagraph 8(1)(h.1)(ii): see Faubert v. M.N.R.,
[1979] C.T.C. 2723: 79 DTC 641
(T.R.B.); Cival v. The Queen, [1981] C.T.C. 392 at 399; 81 DTC 5311 at
5316-17 (F.C.T.D.) (reversed on other grounds by the Federal Court of Appeal
[1983] C.T.C. 153; 83 DTC 5168) . .
.
A little later in the same judgment he
said:
I believe also that subparagraph 8(1)(h)(ii)
can be interpreted somewhat more broadly. Even if the plaintiff were not
specifically required to use his car, he was required to pay his travelling
expenses incurred by him in the performance of his duties and this would also
bring him within the subparagraph. The evidence was clear that to do his job
the plaintiff had to go to the offices of a variety of clients. No provision
was made for reimbursement for transportation for getting to those offices
except with respect to those outside of Vancouver where at least car mileage was allowed. If an employee is
obliged to travel to do his work and his employer is not prepared to pay the
exact and total cost of transportation, then he must come within the
requirements of subparagraph 8(1)(h)(ii). This question was not
under consideration before the Federal Court of Appeal in Cival. On this
basis, it is not really very important whether the plaintiff here was obliged
to use his car or not; he was obliged to get himself and his papers to the
firm's clients and there was no arrangement, at least in the circumstances
relevant to this case, whereby the employer undertook to pay the total
transportation costs.
[27] The Rozen case was cited
with approval by Jerome, A.C.J. in the Mina case (above), when he said
at page 385:
. . . I endorse Mr Justice Strayer's
remarks in Rozen that where an employee is obliged to travel to do his
work, if his employer is not prepared to pay the exact and total costs of
transportation, then he must come within the requirements of subparagraph 8(1)(h)(ii).
It remains to be seen whether the reasonable costs in this situation were
covered by the mileage allowance. If not, they are properly deductible under
paragraph 8(1)(h).
The matter was fully discussed by Justice Rip (as he then was) in O’Neil
v. The Queen, [2001] 1 C.T.C. 2091.
[10] The appellant relied upon a
policy of the Canada Revenue Agency which would apparently interpret the
restrictions in paragraph 8(1)(h.1) to permit under some circumstances a deduction of
automobile expenses beyond those for which the taxpayer received an allowance. This would be the case
where the amounts reimbursed were unreasonably low or an allowance was given
for only certain expenses. This is consistent with the statements from the
cases cited above.
[11] That is not, however, the situation
here. The appellant did receive an allowance for motor vehicle expenses that
was not included in her income. There is no evidence that the allowance of 40.5¢
or 41¢ per kilometre was unreasonable. Indeed she was paid by her employer the
full amount claimed. It is I think a fair inference that if she had claimed
more she would have received it.
[12] Moreover, I am not satisfied that
the amount claimed by the appellant would be fully deductible even if she were
not limited by subparagraph 8(1)(h.1)(iii). Roughly 19,000 kilometres
were attributable to travelling from her home in Scarborough to her place of
employment. As stated above, such expenses are not deductible.
[13] The appeals will therefore be
dismissed.
Signed at Ottawa, Canada, this 3rd day of August 2007.
“D.G.H. Bowman”
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