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: Is an allowance eligible for the special work site exemption as either a remote work location, or as a special work site to which the exception to clause 6(6)(a)(i)(B) applies for a distance less than 80 kilometres.
Position: 1. The location is not a remote work location.
2. Not a special work site.
3. Residence is less than 80 Km. from work site. From the facts provided, it is reasonable for the individual to return home on a daily basis.
Reasons: 1.There are established communities within 80 km. of the work site.
2. The individual's period of employment at the site is more than two years.
3. The position is based on the information available.
XXXXXXXXXX 2000-002960
D. Shugar
June 30, 2000
Dear XXXXXXXXXX,
Re: Living Allowance Remote/Special Work Site
We are responding to your correspondence of June 1, 2000, requesting our opinion on whether a $XXXXXXXXXX per month living allowance would be exempt from tax under subsection 6(6) of the Income Tax Act (the "Act"). Specifically, you asked us to consider whether your work site is a remote work location for purposes of the exemption. You provided us with the following information:
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. 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).
Subsection 6(6) of the Act allows certain allowances in respect of personal or living expenses received by individuals employed at special work sites and remote work locations, that would otherwise be considered a taxable benefit under paragraph 6(1)(b) of the Act, to be excluded from income. Interpretation Bulletin IT-91R4 "Employment at Special or Remote Work Locations" explains the terms "remote work location " and "special work site" and provides further details concerning the criteria for these exemptions. A copy of IT-91R4 is enclosed.
Remote Work Location
A remote work location is a location at which, by virtue of its remoteness from any established community, the taxpayer could not reasonably be expected to establish and maintain a self-contained domestic establishment. As mentioned in paragraph 14 of Interpretation Bulletin IT-91R4, a work location will be considered to be remote if the nearest established community with a population of 1,000 or more is no closer than 80 kilometres by the most direct route normally travelled in the circumstances. The term "established community", as stated in paragraph 15 of the aforementioned bulletin, is considered to mean a body of people who reside in the same locality and who are permanently settled in that location. There is no requirement that the duties at the remote work location be of a temporary nature.
The St. John's tax services office has previously addressed the question of whether XXXXXXXXXX is a remote work location, and has concluded that it is not remote within the meaning of subparagraph 6(6)(a)(ii) of the Act, in that there are several established communities within a reasonable distance of the site which together provide a minimum level of services. Therefore, the exemption under subsection 6(6) of the Act will only be available if the site qualifies as a special work site in your particular circumstances.
Special work site
In order for the value of board and lodging, or an allowance for such expenses, at a special work site to be excluded from income, subparagraph 6(6)(a)(i) of the Act imposes certain conditions:
- the duties must be of a temporary nature;
- the employee must maintain at another location a self-contained domestic establishment as his or her principal place of residence, which is not rented and which is available for his or her occupancy and to which, by reason of distance, he or she could not reasonably be expected to have returned daily from the special work site; and,
- the period during which he or she is required by his or her duties to be away from his or her principal place or residence, or to be at the special work site or location is not less than 36 hours.
Whether or not these requirements are met is a question of fact that would have to be determined on a case by case basis.
Duties of a Temporary Nature
The CCRA's position as to the interpretation of the word "temporary" in the context of subsection 6(6) of the Act, is reflected in paragraph 6 of Interpretation Bulletin IT-91R4 which describes the general rule that employment for a period beyond two years would not normally be considered temporary. Certainly, where it is known at the commencement of the employees duties that the period of employment at the special work site will exceed two years our position at the outset would be that subsection 6(6) does not have application. The two years is considered to be a reasonable guideline for employment that purports to be a temporary assignment. A period of employment beyond that takes on the characteristics of a long term or permanent assignment.
Where in a particular case the actual period of employment has, or will, extend beyond the two year mark, the key to determining whether subsection 6(6) of the Act applies to the allowance provided by the employer is to consider the terms of employment at the special work site at its commencement. Where the terms of employment indicate that the period of employment at the special work site is anticipated to be less than two years subsection 6(6) of the Act clearly applies. If subsequently, circumstances change, necessitating an extension of that period beyond two years from commencement, the application of subsection 6(6) is not necessarily terminated, if the change in circumstances could not be reasonably anticipated. At the point in time when the need for the extension is known it must be determined whether the extension period can be considered "temporary" or otherwise, and therefore, whether the allowances for board and lodging, and transportation provided by the employer during that period could be excluded from the employees income by virtue of subsection 6(6). Where doubt exists as to the original terms of employment the onus would be on the taxpayer to show that such an extension was not anticipated.
In a phone conversation on June 15, 2000 (Shugar/XXXXXXXXXX) you informed us that the period of your employment at the XXXXXXXXXX site is for 2 1/2 years. If, at the commencement of your employment at the site, it was known that the duration of your employment would be more than two years, the exemption under subsection 6(6) of the Act would not be available. An allowance for board, lodging, or transportation received from your employer would be a taxable benefit in your hands.
Self-Contained Domestic Establishment
If an employee otherwise qualifies for the special work site exclusion under subsection 6(6) of the Act, the employee must also establish that he or she could not reasonably be expected to return daily to his or her principal residence. Individual circumstances will determine whether, by reason of distance, the employee cannot reasonably be expected to return daily to the place where a self-contained domestic establishment was maintained by that employee. In the case of individuals who receive a living allowance yet return home daily, we would consider that subsection 6(6) of the Act would not be applicable and the allowance received would be taxable unless otherwise excluded pursuant to one of the exceptions of subparagraphs 6(1)(b)(i) to (ix) of the Act.
Paragraph 9 of IT-91R4, states:
As a general rule, an employee will not be expected to return to his or her principal place of residence if the work site is more than 80 kilometres (50 miles) from the employee's residence by the most direct route normally travelled in the circumstances. Cases not meeting this general rule are not necessarily disqualified from the exclusion under subsection 6(6) and factors such as the following will be considered:
- the number of hours of work which the employee is required to perform at the special work site each shift;
- the amount of time that would be required for travel and the time of day or night when travel would take place;
- the means of transportation available and the condition of the route that would be travelled (e.g., quality of roadway, seasonal weather conditions, etc.);
- the length of rest period if the employee returned home daily; and
- the general physical and mental health of the employee.
While it is a question of fact as to whether your particular situation warrants an exception from the 80 kilometre general rule, in our view, based on your description of the facts, and information provided from the Government of Newfoundland and Labrador regarding the type of roadway between your place of residence and your work site, your situation would not meet the exceptions described in paragraph 9 of IT-91R4, and, in our view, you can reasonably be expected to return to your principal place of residence daily.
Whether the driving conditions in fall and winter make it unreasonable for you to return to your residence on a daily basis, is a determination that should be made by persons with first hand knowledge of the situation. Thus, if you feel that you have additional information that should be considered, you should present that information to your local tax services office, which is in a better position to make that determination, based on their knowledge of local conditions at different times of the year.
We trust our comments will be of assistance to you.
Yours truly,
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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