25 October 2000 External T.I. 2000-0016025 - HOME OFFICE & TRAVEL EXP.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

1. Deductibility of home-office expenses by an employee?

2. Whether certain travel expenses are considered to be personal or business in nature?

Position:

1. Depending on the circumstances.

2. Travel from one's residence to one's regular work place is personal in nature.

Reasons:1. Where the condition of employment requires the employee to maintain a home-office, the expenses are reasonable and are not reimbursed, they are deductible.

2. There may be more than one regular workplace and the place from which an employee ordinarily performs the duties of employment may change from time to time. See 1999-0015945, 9718515, 971397, 9414885 (refers to 911738, 921407, 912356 ec1522 a-6890ec1189 7-0890

XXXXXXXXXX 	2000-001602
		Franklyn S. Gillman
October 25, 2000

Dear Madam:

Re: Home-Office Expense, Travel Expense

We are replying to your letter of March 7, 2000, concerning an employee who is not a saleperson and the deductibility of home-office expenses and travel expenses. In your letter you proposed the two following scenarios with respect to home-office expenses:

	Office	Travel/Field Work

Position A	70%	30%

Position B	40%	60%

With respect to the ability to deduct travel expenses, you asked whether the following would be considered business or personal travel of the employee:

1. Traveling from a home-office to the employer's office;

2. Traveling from a home-office to a customer's place of business.

Home-Office Expense

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Canada Customs and Revenue Agency (the CCRA).

The Agency publishes Interpretation Bulletin IT-352R2 "Employee's Expenses, Including Work Space in Home Expenses" where it discusses in detail the provisions of the Income Tax Act (the "Act") and the circumstances under which a taxpayer may deduct amounts paid in the year for office rent, supplies and salary to an assistant or substitute in computing income from an office or employment.

Paragraph 1 of IT-352R2 states that "... subparagraphs 8(1)(i)(ii) and (iii) allow a taxpayer, in computing income for a taxation year from an office or employment, to deduct amounts paid in the year as expenses for office rent, supplies and salary to an assistant or substitute. These expenses are deductible provided the following requirements are met:

(a) the taxpayer is required by the contract of employment to pay for such office rent or salary, or to provide and pay for such supplies;

(b) the taxpayer has not been reimbursed and is not entitled to reimbursement for such expenses;

(c) these expenses may reasonably be regarded as applicable to the earning of income from the office or employment; and

(d) in the case of supplies, they are consumed directly in the performance of the taxpayer's duties of the office or employment."

Subsection 8(13) of the Act prohibits the deductibility of amounts for a work space in the home unless the individual either principally performs the duties of the office or employment in that work space, or, the work space is "used exclusively ...for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties...". The term "principally", for the purposes of the Act, is taken to mean in excess of fifty percent while an "office" is defined in subsection 248(1) of the Act to mean "the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration...". Whether either one of these conditions is met by any particular employee involves a factual determination. However, an employee performing only 40% of their employment duties in the home office would not satisfy the first condition.

Although ordinarily the requirements in paragraph 1 of IT-352R2 necessitates that there be an express requirement within the terms of a written contract of employment, it is the Department's general position that this requirement may also be considered to have been satisfied where it is tacitly understood by the employer and the employee that the office in the home be provided, if in fact, it was necessary under the circumstances to fulfill the duties of the employment. In order to determine if an expense incurred by an employee was actually an implied requirement of the contract of employment, the Courts have reviewed whether or not failure to meet the requirement could result in the cessation of employment, poor performance evaluation or other disciplinary action on the part of the employer.

Form T2200, Declaration of Employment, pursuant to Subsection 8(10) of the Act, is the prescribed form which must be signed by an employer certifying that the required conditions were met in order to claim deductions under paragraphs 8(1)(a),(f),(h),or (h.1), as well as subparagraphs 8(1)(i),(ii) or(iii). Since the form is used for various types of expenses that may be claimed by an employee, some of the questions on the form may not be applicable to a particular situation. A negative response to those questions which do not apply to the employee will not necessarily preclude the employee from claiming those expenses to which the employee is entitled.

Travel Expenses

With respect to whether certain travel is considered business or personal travel for income tax purposes, the employee's regular place of work is a determining factor since travel from one's home to one's regular place of work would be considered personal in nature. The regular place of work is usually the location at or from which the employee performs the duties of employment. However, there may be more than one regular workplace and the place from which an employee performs the duties of employment may change from time to time. If an employee, whose regular place of work is the home office, is required to regularly and habitually attend staff or other meetings at the main office, it may be that the main office remains one of two locations from which the employee regularly performs the duties of employment. As a result, travel between such locations may be viewed as personal in nature. In determining whether a particular location is a regular place of work, the regularity of the reporting and the nature of the duties carried on at this location is more important than the fact that an employee may only report to the work location once or twice each month.

We trust these comments will be of assistance.

Yours truly,

for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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