REASONS FOR JUDGMENT
Jorré D.J.
Introduction
[1]
This is an employment expense case. In 2010 the Appellant worked in the film industry as a second camera assistant.
[2]
In the year in issue the Appellant worked on five different film or television productions. She was hired separately for each production and signed a contract in respect of each production. The contracts are referred to in the industry as “deal memos”.
[3]
The only issue is whether the Appellant is entitled to $1,149 in employment expenses claimed in her return for the 2010 taxation year, or any portion thereof.
[4]
No T2200 form has ever been produced and one of the subsidiary issues is whether, in the circumstances of this case, there can be an employment expense deduction in the absence of any T2200 form. The discussion of this issue begins at paragraph 83 below.
[5]
Another subsidiary issue is: Who was, or who were, the Appellant’s employer(s) in 2010?
[6]
It is my understanding that there are a number of other appeals with certain similarities before this Court. Apparently the two subsidiary issues also arise in many of those matters and the outcome of this matter may help the parties reach a settlement in those other matters.
[7]
As explained below, I have determined that the Appellant worked for five different employers over the course of the year and that a payroll service provider, Entertainment Partners Canada (“EP Canada”), was not her employer.
The Statutory Framework
[8]
The Income Tax Act (Act) has very specific provisions governing the deductibility of employment expenses. The starting point is the opening paragraph of subsection 8(1) of the Act which states:
8(1) In computing a taxpayer’s income . . . from . . . 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:
. . .
[Emphasis added.]
[9]
In addition subsection 8(2) of the Act provides that:
(2) Except as permitted by this section, no deductions shall be made in computing a taxpayer’s income . . . from . . . employment.
[10]
Thus, in order to claim employment expenses it is necessary to show that the expenses fall within one of the specific paragraphs following the opening words of subsection 8(1) of the Act.
[11]
In this case, the only provisions of the Act which could give rise to a deduction are paragraphs 8(1)(h) or (h.1) and subparagraph 8(1)(i)(iii) which provide that:
8(1) . . .
(h) 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 the travel expenses incurred by the taxpayer in the performance of the duties of the office or employment,
amounts expended by the taxpayer in the year (other than motor vehicle expenses) for travelling in the course of the . . . employment, except where the taxpayer
(iii) received an allowance for travel expenses that was . . .
. . .
(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 . . .
. . .
(i) an amount paid by the taxpayer in the year . . . as
. . .
(iii) the cost of supplies that were consumed directly in the performance of the duties of the . . . employment and that the . . . employee was required by the contract of employment to supply and pay for,
. . .
to the extent that the taxpayer has not been reimbursed, and is not entitled to be reimbursed in respect thereof;
. . .
[Emphasis added.]
[12]
Three other provisions are also relevant.
[13]
First, with respect to the portions of subsection 8(1) of the Act that may be relevant here, a prescribed form T2200 signed by the employer is a precondition to deductibility.
[14]
This is set out in subsection 8(10) of the Act which reads as follows:
(10) An amount otherwise deductible for a taxation year under paragraph (1) . . . (h) or (h.1) or subparagraph (1)(i)(ii) or (iii) . . . by a taxpayer shall not be deducted unless a prescribed form, signed by the taxpayer’s employer certifying that the conditions set out in the applicable provision were met in the year in respect of the taxpayer, is filed with the taxpayer’s return of income for the year.
[15]
However, subsection 220(2.1) of the Act reads:
(2.1) Where any provision of this Act . . . requires a person to file a prescribed form . . . the Minister may waive the requirement, but the person shall provide the document . . . at the Minister’s request.
[16]
Second, as a result of subsection 8(4) of the Act, no meal may be claimed unless the employee was required by his or her duties:
(a) to be away from the municipality and the metropolitan area of the employer establishment to which the employee ordinarily reported for work
(b) for a period of at least 12 hours.
[17]
As a result, in order to deduct an expense, all of the following requirements must be met:
(a) the Appellant must incur the expense,
(b) the expense must be for the purpose of the employment,
(c) the expense must meet the requirements of one of the paragraphs following subsection 8(1) of the Act, including the requirements as to the nature of the expenditure (for example, it must be for travel meeting certain criteria or for supplies consumed) and, in the case of meals, the requirements of subsection 8(4) of the Act must be met,
(d) the employment contract must require that the employee pay for the expense,
(e) the expense must not be reimbursed and
(f) a T2200 form
(i) must be filed with the tax return;
(ii) however, if the Minister has waived the requirement to file, the form must be provided at the Minister’s request.
[18]
The T2200 form is not determinative as to the conditions of employment if the evidence leads to different conclusions.
[19]
The Respondent does not really dispute the first requirement, that the expenses were incurred with respect to those items for which there are receipts. The other requirements are in issue.
Facts and Analysis
[20]
The Appellant testified as well as Sarah Donati, senior payroll manager at EP Canada, Marshall Sone, the Appellant’s accountant and representative and Elaine Armstrong, a team leader for litigation in the Ontario region at the Canada Revenue Agency. Some 16 exhibits were filed and the hearing lasted a full day.
[21]
The Appellant claimed $1,149 in her tax return as deductible employment expenses.
[22]
The Appellant filed Exhibit A-8 which has at the top left the words “T777 Details” showing $3,352 in employment expenses.
[23]
There is a 65% difference between the expenses of $3,352 shown on the T777 form produced as Exhibit A-8 at trial and the $1,149 amount claimed in the 2010 tax return.
[24]
The Appellant was unable to explain the difference. She did not remember on what basis the amount of $1,149 was claimed in her return of income; she agreed with her representative’s suggestion that the $3,352 must have been discounted.
[25]
As stated previously, the Respondent did not challenge the fact that the expenditures in respect of which there are receipts in Exhibit A-9 were incurred. Those receipts support the three‑page summary found at the beginning of Exhibit A-9. However, the Respondent did contest the deductibility of the expenditures in other respects, including whether they were for employment.
Who Was(Were) the Employer(s)?
[26]
The Appellant takes the position that EP Canada was the employer and presented evidence as to how she sought, but was unable to obtain, a T2200 form from EP Canada. As a result the question of who was the Appellant’s employer arises.
[27]
In general terms in a contract of employment one person, the employer, hires another person, the employee, to perform work at the direction of the employer. In return the employer pays the employee.
[28]
There is no question that an employer can carry out its contractual obligations not only by its employees but also by means of contractors hired to perform certain functions.
[29]
Nothing in the evidence suggests that EP Canada hired the Appellant or told the Appellant what work to perform.
[30]
It was quite clear from the testimony of Sarah Donati that EP Canada was only a provider of payroll services to production companies. As part of those services EP Canada also prepared and sent the T4s and would prepare records of employment for employment insurance purposes.
[31]
The Appellant’s testimony was that for each of the five film or television projects she worked on she signed a deal memo. Generic sample documents, including a sample deal memo, were filed as Exhibit A-6. The Appellant did not keep copies of the deal memos she signed.
[32]
It is the production companies who hired and paid individuals such as the Appellant to work on the television or film production. They are clearly the employer as can be seen from the following excerpt from the first page of the sample deal memo:
This Crew Deal Memo (the “Agreement”) sets forth the terms and conditions of the agreement between Killjoys IV Productions Limited (“Producer”) and the above-named individual (“Artist”) for the services of Artist as a crew member on the above-mentioned television series (the “Production”).
1. Producer hereby engages Artist to render exclusive services on the Production in the above-referenced position and Artist hereby accepts such engagement. Artist shall render all services required by Producer on and following the Start Date set forth above, as when and where required by Producer. Artist shall comply with all directions, requests, rules and regulations of Producer in connection with Artist’s services hereunder, and shall perform such services in a diligent manner.
2. Artist shall be paid for his/her services hereunder at the Rates set forth above. . . .
[33]
There is no doubt that the Appellant was employed by the five production companies, and not EP Canada who was simply paying the Appellant on behalf of the production companies.
The Expenses
[34]
I will now turn to the expenses set out in the three‑page summary at the beginning of Exhibit A-9.
Travel Expenses and Car Expenses
[35]
The expenses under the headings “travel expenses” and “car expenses” total $1,625 and $242 respectively.
[36]
Except for an $8 parking expense and another expense of $9 described as “work travel”, the rest of the expenses under “travel expenses” are described as “gas for work”.
[37]
The “car expenses” are all car repair expenses.
[38]
In direct examination the Appellant made it quite clear that she did not own a car. She went on to explain that most of the time her mother would give her a ride to or from work although occasionally she would catch a ride with a co‑worker. She felt it appropriate that she pay part of her mother’s car expenses and the claimed expenses were amounts she paid for her mother.
[39]
The Appellant was employed for varying periods of time by five different production companies.
[40]
Almost all the expenses claimed and listed on the summary at the beginning of Exhibit A-9 are in the first six months of the year. The listing shows only three items in the second half of the year: a car repair bill on August 30, gas on October 20, and an expense described as “iPhone battery ext.” on November 19.
[41]
There is no logbook or any other evidence that might give some sense of the distances travelled and the reasonableness of the claim if otherwise deductible. The evidence does not disclose how many days the Appellant worked at each location and does not disclose how many days she worked in total.
[42]
My first difficulty is that it is not at all apparent how much of the expenditure incurred would properly relate to going to work.
[43]
My second difficulty comes from the fact that it is well established that the cost of getting to work is not normally deductible; it is generally a personal expenditure. There are certain exceptions to this in what one might describe as non‑standard situations. Nevertheless, in order to determine whether certain travel to work, if any, would be deductible, one needs to have specific factual evidence.
[44]
To illustrate a non‑standard situation, one might take as an example the case of Chrapko v. Canada, where the Federal Court of Appeal dealt with the appeal of an employee of the Ontario Jockey Club who lived in Niagara Falls and worked 75% of the time in Toronto at either the Woodbine or the Greenwood race track and 25% of the time at the race track in Fort Erie. Fort Erie is a fair distance from Toronto but much closer to Niagara Falls than Toronto.
[45]
Mr. Chrapko claimed his travel expenses to go to work at all three locations. The Federal Court of Appeal did not allow the Appellant to claim the cost of going to work at either of the two Toronto race tracks but did allow the cost of travelling from home to the Fort Erie race track. Although both were in Toronto, there was a fair distance between the Woodbine and Greenwood race tracks.
[46]
The evidence here is not sufficient to make any determination as to what quantum of expenditure might relate to travel to work in non‑standard circumstances where the cost of going to work may be deductible.
[47]
With five different employers one has to look at the question of deductibility with respect to each different employer. We know that there is one employer for whom the Appellant worked for a single day at one location; clearly that is simply travelling to work and not deductible.
[48]
With respect to the other employers there were different locations but as I already stated we do not know where or for how long. It appears that overall most of the work was in Toronto. On any given day there was filming at a single location. There is no suggestion that the Appellant had to work in different locations on the same day.
[49]
The mere fact of filming in different locations in Toronto on certain days for a particular employer is not enough to make the cost of going to work deductible.
[50]
On the other hand, if there is out‑of‑town filming away from the usual area of filming, and if the travel costs involved are not reimbursed, that might well be deductible. There might also be unusual situations when filming within Toronto as well.
[51]
There was reference to filming outside Toronto but little detail. In one production approximately 70% of the filming was in Toronto and 30% outside Toronto. Another production was partially in Toronto and partially outside Toronto. There were two productions entirely in Toronto. Finally, there was a production filmed entirely in Hamilton.
[52]
The first two productions are situations where part of the expense of getting to work might be deductible if there were evidence allowing for determination of the related costs, assuming the travel was not reimbursed or provided.
[53]
With respect to the film made entirely in Hamilton, Hamilton would be the usual place of employment and travel to work there would not be deductible.
[54]
Thus, while there might be potentially allowable travel expenses, given the evidence I am unable to see a basis upon which I could conclude that any particular amount of the expenses was incurred for travel to work in circumstances that could be deductible.
Food and Meal Expenses
[55]
The claim for $108 of food and meal expenses must fail because factually it has not been demonstrated that these expenses meet the requirements of subsection 8(4), i.e. they were consumed while outside of the metropolitan area of the employer’s establishment for a period of at least 12 hours.
Accounting
[56]
There is a $577 expense for the preparation of an income tax return. It is not entirely clear to me if this is being claimed but I do not see on what basis this could be deducted under any of the provisions of the Act that could have application here.
[57]
This amount is not deductible.
Telecommunication Services
[58]
Amounts were claimed for cell phone expenses ($308), Internet use ($309) and home phone use ($176), a total of $793.
[59]
While I am satisfied, based on the Appellant’s testimony, that part of her use of her cell phone and a small part of her home phone and Internet use was for work, I have difficulties with the quantum.
[60]
The amounts largely correspond to the total amounts of the copies of bills filed.
[61]
The Appellant gave examples of her use of her cell phone at work and stated that about half of her use of that phone was for work.
[62]
The factual situation is confused by the fact that the Appellant received a cell phone allowance of $5 a day (maximum of $25 a week) while working for two of the production companies but not when working for the other three. Under paragraph 8(1)(i) the cell phone expenses related to a particular employer would only be deductible to the extent that they were not reimbursed.
[63]
The evidence does not disclose what amounts were reimbursed and it is impossible to know what net amount might be deductible.
[64]
The evidence does not suggest a particular proportion of the total usage of the home phone or the Internet was for work. We do know that the Appellant split the cost of the Internet with her brother.
[65]
There might well be some additional telecommunication expenses for work purposes beyond the amount reimbursed, particularly with respect to the cell phone. The Appellant has not demonstrated that any specific amount is deductible. Whatever that amount would be, it is certainly less than a third of $793.
Media and Entertainment Purchases
[66]
This heading is the one used by the Appellant and is not very descriptive of these items. An amount of $247 was claimed under this heading for an assortment of items.
[67]
Among the items are six smart phone cases, six external battery chargers for an iPhone, an “iPhone battery ext.”, an iPod charger and a “DVD for work”.
[68]
The Appellant testified that many filming locations were dusty and her phone cases got dirty and as a result she frequently replaced her phone cases.
[69]
She also testified that sometimes they would be on location for a very long time and as a result she needed to extend the battery life of her cell phone.
[70]
There was no detail as to how the DVD related to work.
[71]
Nothing in the evidence explained how an iPod was used for work and, as a result, how an iPod charger related to work.
[72]
Much of this category is personal, some of it may be partially related to work and some may be entirely related to work. Whatever might be the amount that properly relates to work it is a sum a good deal less than the $247 claimed.
[73]
To sum up what we have examined so far, there is a small amount of expenditure that was related to work. Whatever that amount is, it is not only much less than the $3,352 shown in Exhibit A-9, it is very significantly less than the $1,149 claimed.
Contractual Obligation
[74]
While there are many exceptions, the general practice is that employers provide the means by which employees carry out their work. Hence an individual claiming employment expenses needs to demonstrate that this is not the case by showing that the employment contract required the employee to pay certain expenses.
[75]
The sample contractual documents filed do not have provisions requiring the employee to pay any particular expenses. This includes the sample union agreement.
[76]
While the Appellant testified generally as to the nature of many of the expenses and why she made them, she did not testify to any specific written or unwritten conditions of employment or any explicit understandings that she must pay certain expenses.
[77]
The requirement is not whether the expenditures were made. The requirement is that the contract must oblige the employee to pay for the expenses.
[78]
However, there are some written provisions which provide for the employer paying certain expenses and other provisions that seem to open the door to the possibility of the employer paying for certain expenses. The Appellant received kit allowances from all five employers and cell phone allowances from two employers.
[79]
Section 11 of the union agreement provides that employers shall pay for certain travel expenses outside of Metropolitan Toronto.
[80]
The Conditions of Employment and Accounting Procedures in the sample documents may open the door to reimbursement for incremental cell phone costs upon prior approval and for various miscellaneous purchases and costs on approval although it is far from clear what, if anything, would be reimbursed by the employer if it is not set out in the deal memo.
[81]
With one exception, the Appellant has not demonstrated that there were any implicit terms of the contract requiring her to pay the expenses in issue.
[82]
Given the absence of a contractual requirement apart from the one exception just noted, for that reason alone the Appellant does not meet the requirements of the Income Tax Act with respect to the expenses claimed, apart from that one exception.
Is Form T2200 Always Obligatory?
[83]
By way of background, the Appellant testified she tried to get a T2200 form from EP Canada but was unable to; therefore, the requirement in subsection 8(10) should not apply.
[84]
On its face, subsection 8(10) is mandatory. The key words are “[a]n amount . . . shall not be deducted . . . unless a prescribed form . . . is filed . . .”
. Similarly, under subsection 220(2.1) the taxpayer “. . . shall provide the document . . . at the Minister’s request”
.
[85]
In determining whether in any particular circumstances the filing of a T2200 form might not be required, it is helpful to consider the question: What would be the legal basis underlying a conclusion that filing the form may not be necessary?
[86]
Under the doctrine of the separation of powers, it is a basic principle of our constitutional law that the role of the courts is to apply legislation and not to amend or suspend it. Enacting and amending legislation is the role of Parliament and the provincial legislatures. Administering legislation is the role of the executive.
[87]
From this principle, it follows that a court cannot ignore the requirements of subsections 8(10) or 220(2.1) of the Income Tax Act.
[88]
However, there is a separate question as to what exactly is the obligation imposed by the Act.
[89]
It is useful to recall section 10, and especially section 12, of the Interpretation Act. They read as follows:
10 The law shall be considered as always speaking, and where a matter or thing is expressed in the present tense, it shall be applied to the circumstances as they arise, so that effect may be given to the enactment according to its true spirit, intent and meaning.
. . .
12 Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects.
[90]
The question that may arise with respect to a particular legal requirement in certain factual circumstances is whether the maxim that “the law does not require the impossible” has any application. This is, in effect, a rule of interpretation.
[91]
Given that the possibility of dispensing with the required form arises from reading into the text of the particular provision of law that the law does not require the impossible, if the maxim applies, it is clear that a very high standard of effort to comply with the law would be required of the taxpayer.
[92]
To meet that standard, an individual would need to make the efforts that a careful, diligent person who is aware of their legal obligations would make.
[93]
In addition, in a case where an employer has refused to fill out the form, it would have to be shown that the employer acted unreasonably or in bad faith.
[94]
There are two cases where this Court has raised the possibility that there may be circumstances where employment expenses may be allowed even though a required T2200 form has not been produced. I agree that there may be such circumstances if it is impossible for a person to obtain the T2200 form.
[95]
In Brochu v. The Queen, Justice Boyle said:
11 . . . While it may be possible that in exceptional circumstances a paragraph 8(1)(h.1) claim could succeed if an employer unreasonably refused, or was unable, to complete and sign a T2200 form, this is clearly not such a case. . . .
[96]
A similar question came up again in Kreuz v. The Queen. In Kreuz, Justice D’Auray concluded that the Appellant had not demonstrated that the employers had acted unreasonably or in bad faith; accordingly, the T2200 form was obligatory.
[97]
In this case, the Appellant led evidence that she tried to obtain a T2200 form from EP Canada.
[98]
I am satisfied that EP Canada had good reason to refuse. It was not the employer and it was not retained by the employers to prepare T2200 forms.
[99]
The Appellant has not shown that any of her five employers were unreasonable or in bad faith in refusing to produce a T2200 form. In addition, she never sought T2200 forms from the five employers.
[100]
As previously discussed, subsection 8(10) requires an individual to file the form with their income tax return unless the Canada Revenue Agency waives the requirement to file the form pursuant to subsection 220(2.1), in which case the individual must provide the form upon request from the CRA.
[101]
Diligence requires an individual to take steps to obtain a completed form in time for the tax return due date.
[102]
Indeed, a diligent individual seeking to comply with the obligation to file the form would see upon reading the version of the T2200 form for the 2010 taxation year that it said near the top: “The employee does not have to file this form with his or her return, but must keep it in case we ask to see it. . . .”
[103]
The Appellant’s evidence did not outline such steps. At the hearing she testified that she had only become aware recently of form T2200.
[104]
In this case, there was not the required diligence in seeking to obtain a completed form.
Subparagraph 7b) of the Original Reply to the Notice of Appeal
[105]
Subparagraph 7b) was an assumption of fact that the Appellant was an employee of EP Canada Film Services Inc. It was withdrawn in an amended reply and a further amended reply, both of which were filed the week before the hearing. The amended replies were filed on consent.
[106]
Counsel for the Respondent stated that the Appellant was advised that there would be an amendment a few weeks before the hearing.
[107]
I would first observe that even if that assumption had not been withdrawn on consent, the evidence was crystal clear that EP Canada was not the employer. That is evident on reading the sample deal memo.
[108]
While that assumption, even if it had not been withdrawn, could not change the facts, it was not helpful to the appeal process. It contributed to the Appellant devoting effort to showing that EP Canada refused to provide a T2200 form and is a consideration in dealing with costs.
[109]
It is surprising that, after going through the audit stage and the objection stage, discussions between the Canada Revenue Agency and the Appellant or her representative would not have made it apparent that the Appellant had several employers in the year.
The GST Rebate
[110]
Originally, there was also an issue regarding a GST rebate of $277.46 claimed and denied by the Canada Revenue Agency. At the opening of the hearing, the Respondent conceded the issue. This will be taken into account in the judgment.
Costs
[111]
Normally, I would not award costs in a case where the result is more or less evenly divided, as is the case here as a result of the concession, and where the hearing was entirely devoted to an issue where the Appellant was unsuccessful.
[112]
However, I think that in this case it would be appropriate for me to award limited costs to the Appellant. These costs are a portion of the costs permissible under the Tax Court of Canada Rules (Informal Procedure).
[113]
I do so for two reasons: First, the late withdrawal of the assumption in subparagraph 7b) of the original reply to the notice of appeal. Second, the Appellant had to incur some costs early in the appeal process in order to obtain the concession on the GST credit.
[114]
Taking account of these considerations and of sections 11, 11.1 and 11.2 of the Rules, I set the costs at a lump sum of $200.
Conclusion
[115]
For the reasons set out above, the appeal is allowed and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the Appellant is entitled to claim a GST rebate of $277.46. Costs of $200 are awarded to the Appellant.
Signed at Ottawa, Ontario, this 2nd day of May 2018.
“Gaston Jorré”
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