Charland v. The Queen, docket 1999-1143-IT-I (Informal Procedure)

Date: 20000928

Docket: 1999-1143-IT-I

BETWEEN:

MAX CHARLAND,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasonsfor Judgment

Lamarre Proulx, J.T.C.C.

[1]            This is an appeal under the informal procedure for the 1993 and 1994 taxation years. The issue is whether the appellant worked for Les Entreprises N. Giguère Enr. as an employee or as a self-employed worker during those years.

[2]            The facts on which the Minister of National Revenue ("the Minister") relied in making his reassessments are set out as follows in paragraph 7 of the Reply to the Notice of Appeal ("the Reply"):

[TRANSLATION]

(a) the appellant's income tax return for each of the 1993 and 1994 taxation years had to be filed at the latest by April 30, 1994, and April 30, 1995, respectively;

(b) the appellant did not file a tax return for the 1993 and 1994 taxation years;

(c) since the appellant failed to file his tax returns for the 1993 and 1994 taxation years, the Minister assessed the tax payable, interest and a late filing penalty for each of the said taxation years using information in his possession;

(d) in objecting to the assessments, the appellant submitted amended tax returns for the 1993 and 1994 taxation years in which he claimed that he operated a business involving services rendered mainly on the premises of Normand Giguère operating as Les Entreprises N. Giguère Enr.;

(e) the appellant claimed the following expenses for the taxation years at issue:

1993 1994

(i) insurance 850.00 850.00

(ii) accounting 250.00 250.00

(iii) motor vehicle 5,490.00 4,535.00

(iv) office 1,140.00 1,200.00

(v) maintenance and repairs 410.00 380.00

(vi) interest, bank charges 95.00

(vii) delivery and transportation 295.00 280.00

(viii) equipment rental 583.00 490.00

(ix) tools and supplies 1,790.00 1,098.55

(x) business tax 390.00

(xi) management fees 115.00

(xii) telephone and utilities 120.00

(xiii) capital cost allowance 2,332.50      

13,235.50 9,708.55

(f) the Minister looked at the appellant's working conditions at Les Entreprises N. Giguère Enr.:

(i) the appellant was not usually required to work away from the payer's place of business;

(ii) the appellant did not have to pay for expenses incurred in performing the work assigned to him;

(iii) the appellant was not obliged to rent an office away from the payer's place of business or use part of his home;

(iv) the appellant did not have to purchase the supplies used directly in the performance of his duties;

(v) when the appellant had to go to repair cars away from the payer's place of business, he used a vehicle owned by the payer.

[3]            The appellant admitted subparagraphs 7(a) to (e) of the Reply.

[4]            As regards the statement in subparagraph 7(f)(i), the appellant said that he sometimes worked away from the business's garage when calls came in concerning vehicles that had broken down.

[5]            As regards subparagraph 7(f)(ii), the appellant said that he had to provide his own toolbox. He also said it has happened a few times that he took his own vehicle to get to places where he had to do repairs.

[6]            As for the statement concerning the office expense, he argued that the office was necessary so that he could, once a week, draw up the invoice that the business requested of him so that he could be paid as a self-employed worker. The invoices in question were filed as Exhibit A-1. They show an hourly rate of $13 initially and $14 as of May 3. The average number of hours worked each week is about 46. The appellant said that the number of hours he worked was not always the same. It could vary within a range of anywhere from a few hours to ten or so hours a week. This is shown by the invoicing summary table for 1993 filed as Exhibit A-2.

[7]            Exhibits I-1 and I-3 are the tax returns established by the Minister for 1993 and 1994. The total earnings shown for 1993 are $30,031.50 and are entirely from Les Entreprises N. Giguère Enr. For 1994, there are earnings of $4,520.30 from Les Entreprises N. Giguère Enr. and $6,160 from Les excavations Maurice Daoust Inc.

[8]            Exhibits I-2 and I-4 are the tax returns prepared by the taxpayer for 1993 and 1994 in response to those established by the Minister. In those returns, the appellant states that he is a self-employed worker and claims the expenses referred to in subparagraph 7(e) of the Reply.

[9]                 Normand Giguère testified for the respondent. He confirmed that the appellant did not have to work away from the garage except when there were emergency calls. At such times, the appellant used the garage's vehicle. The appellant did not have to pay any expenses aside from providing his own toolbox, although the garage provided most of the necessary tools. He said that any work that was redone was redone at the garage's expense. The appellant had stated that there had been a few times when he had not included the hours he had worked in instances where it had been necessary to redo work. Exhibit I-5 is the statement of the appellant's working conditions drawn up by the employer on February 16, 1998. The description of those working conditions confirms the facts taken into account by the Minister and set out in the Reply.

[10]          The appellant's agent also questioned the procedural fairness of the audit conducted by Employment Insurance officers in respect of Les Entreprises N. Giguère Enr. That business had a policy of recruiting its workers as self-employed individuals. The evidence did not show whether the workers signed a contract for services. No contract was filed in evidence. The Employment Insurance audit officers determined that the workers were employees, which the employer accepted.

[11]          The Auditor's Statement of Account was filed as Exhibit A-3. That statement was accepted by the employer. The auditor does not seem to have met with the workers. In this regard, Mr. Giguère said that he had asked the workers to go and meet with the auditors but they never went.

Conclusion

[12]          There is not a shadow of a doubt that we are dealing here with a contract of employment and not a contract for services. The appellant worked every weekday, 46 hours on average, for the same person. That is what is called full-time employment. The appellant had no risk of loss and was paid for the hours he worked. He did not hire his own assistants. He could not arrange to have someone fill in for him. He did not find his own customers. There is really nothing to indicate that the appellant was in a contract for services situation.

[13]          As regards the possible employment-related deductions, they are provided for in section 8 of the Income Tax Act ("the Act"). We learn from that section that the only deduction that might be applicable is that set out in subparagraph 8(1)(i)(iii), which reads as follows:

8(1) Deductions allowed — 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:

. . .

(i) . . .

(iii) the cost of supplies that were consumed directly in the performance of the duties of the office or employment and that the officer or employee was required by the contract of employment to supply and pay for,

. . .

[14]                 However, the appellant did not mention any tools normally destroyed through use or any equipment used directly in the performance of his duties. He referred only to the cost of purchasing tools as found in his statement of expenses cited in subparagraph 7(e) of the Reply, supra, without explaining which tools were involved. In the circumstances, section 8 of the Act does not apply.

[15]          As for the procedural fairness argument, the appellant's agent submitted that, before reaching an agreement or decision on whether the employment of the business's workers was insurable, the auditor should have met with the workers to find out what their working conditions were. He suggested that the fact that the decision was made without meeting with the workers prevented them from getting involved in a timely fashion and infringed their rights.

[16]          I must point out that the Employment Insurance Act provides a process for appealing a decision by the Minister that a person holds insurable employment. It is that method of appeal that should have been used if for some reason one was dissatisfied with the decision on the insurability of the employment. I have no jurisdiction to rule on a decision made by the Minister under the Employment Insurance Act when the appeal before me concerns an assessment made by the Minister under the Act. It is on the validity of that assessment alone that I must rule.

[17]                 Subsection 152(7) of the Act provides that the Minister is not bound by a return or information supplied by a taxpayer. It reads as follows:

152(7) Assessment not dependent on return or information. The Minister is not bound by a return or information supplied by or on behalf of a taxpayer and, in making an assessment, may, notwithstanding a return or information so supplied or if no return has been filed, assess the tax payable under this Part.

[18]          The Act provides ways to contest an assessment, namely through an objection served on the Minister and an appeal to this Court. The appellant did not argue that he had been deprived of his means of contesting the assessment.

[19]          It is therefore my view that the Minister's assessment was correctly made. Based on the evidence, I can only conclude that the appellant was an employee and not a self-employed worker.

[20]          The appeals are accordingly dismissed.

Signed at Ottawa, Canada, this 28th day of September 2000.

"Louise Lamarre Proulx"

J.T.C.C.

[OFFICIAL ENGLISH TRANSLATION]

[OFFICIAL ENGLISH TRANSLATION]

1999-1143(IT)I

BETWEEN:

MAX CHARLAND,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeals heard on July 28, 2000, at Montréal, Quebec, by

the Honourable Judge Louise Lamarre Proulx

Appearances

Agent for the Appellant:                         Raymond Charland

Agent for the Respondent:                   Annick Provencher (Student-at-law)

JUDGMENT

          The appeals from the assessments made under the Income Tax Act for the 1993 and 1994 taxation years are dismissed.

Signed at Ottawa, Canada, this 28th day of September 2000.

"Louise Lamarre Proulx"

J.T.C.C.