7 November 2000 External T.I. 2000-0030835 - EMPLOYER REQUIREMENT TO ISSUE T2200

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: What is an employer's responsibility to issue a T2200.

Position: Section 8(10) of the Act applies.

Reasons: The employee may request that the employer sign form T2200 certifying the conditions of that employee's employment. Note however that the Jane M. Baptist case, which in April 2000, ruled that income from special pay duty is income from employment, has been appealed by the taxpayer.

XXXXXXXXXX 2000-003083
D. Shugar
November 7, 2000

Dear XXXXXXXXXX:

Re: T2200 for Officers on Paid Duty

This is in reply to your correspondence of June 5, 2000 in which you requested direction regarding the responsibility of an employer to issue form T2200 "Declaration of Conditions of Employment" to police officers who earn income from special paid duty. Special pay duty is performed during the officer's time off from ordinary duty.

Our Comments:

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.

In the case of Jane Baptist v. The Queen, (2000 DTC 2045), the Tax Court of Canada determined that the income of police officers who perform paid duty functions is income from employment. The taxpayer has appealed this case to the Federal Court of Appeal. However, until the appeal is decided, the Canada Customs and Revenue Agency (the "CCRA") intends to maintain its position that income from special paid duty is income from employment.

Pursuant to subsection 8(2) of the Income Tax Act (the "Act"), only expenses which are expressly permitted under section 8 of the Act can be deducted in computing income from an office or employment. In order to deduct expenses under paragraphs 8(1)(a), (f), (h), or (h.1) of the Act, and subparagraphs 8(1)(i)(ii) and (iii) of the Act, employees must file form T2200 with their return of income. Some of the deductions permitted under section 8 of the Act are explained below.

At the end of the year, for tax purposes, the employee may request that the employer sign form T2200 certifying the conditions of that employee's employment. One of the purposes of requiring an employee to file form T2200 duly signed by the employer and certifying specific conditions of the employee's employment, is to ensure that an employee can only deduct those expenses he or she is potentially entitled to deduct. It is incumbent upon the employer to make clear the types of expenses which the employee is required to pay and for which the employee did not receive any allowance or repayment. In other words, the items which an employee seeks to claim may actually be disallowed on the basis that it does not agree with what the employer has certified as actually being required to be paid by the employee.

The T2200 requires both parties to set out the conditions of employment. It does so by asking specific questions, the answers to which will determine whether, or the extent to which, the employee may be entitled to employment deductions under section 8 of the Act. It should be emphasized that the form itself does not require the employer to make that determination, just to certify the conditions of employment.

Although the signing of the T2200 by the employer is a prerequisite in order for an employee to be able to claim a deduction for certain employment expenses, a signed T2200 does not provide an employee with any assurance that any expenses incurred are deductible since the Act contains other criteria that the employee must satisfy.

Travelling Expenses (other than motor vehicle expenses)

Under paragraph 8(1)(h) of the Act, reasonable amounts that an employee spends in the year for travelling in the course of an office or employment may only be deducted from the employee's income from an office or employment if the employee is ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places; if the employee is required, under the contract of employment, to pay travel expenses incurred in the performance of the duties of the office or employment; and, if the employee is not in receipt of an allowance for motor vehicle expenses that is excluded from income by virtue of paragraph 6(1)(b) of the Act.

Considering the meaning of ordinarily, the jurisprudence indicates that this term describes activities which are normal, or of regular occurrence; in other words, activities which are not rare or abnormal or minimal. Courts have also interpreted the word ordinarily to mean 'in most cases' or 'as a general rule.' As stated in paragraph 32(a) of Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees, ordinarily means 'customarily' or 'habitually' rather than 'continually,' but there should be some degree of regularity in the travelling that the employee is required to do.

With respect to the meaning of required, such an activity must be one which is specifically understood by both the employer and the employee to be necessary for the proper performance of the contract. The term required means that the travelling is necessary to the satisfactory performance of the employee's duties (it does not necessarily imply that the employer must order the employee to travel).

For meal expenses to be deductible under paragraph 8(1)(h) of the Act, subsection 8(4) of the Act requires that the meal be consumed during a period while the employee was required by the duties of employment to be away, for a period of at least twelve hours, from the municipality where the employer's establishment to which the employee regularly reported for work was located and away from the metropolitan area where it was located. Employees who are hired at a series of places at which the employer is carrying out a contract or contracts cannot meet this requirement as each such place is considered to be the establishment to which the employee is required to report for work during the time worked there.

Motor Vehicle Expenses

As for the deduction for motor vehicle expenses under paragraph 8(1)(h.1) of the Act, where employees report directly to the work sites, the motor vehicle expenses the employees incur to get from their homes to a particular work site would not be deductible under paragraph 8(1)(h.1) of the Act because, as explained in paragraph 14 of Interpretation Bulletin IT-522R, these expenses would be considered to be personal in nature and, as such, would not be considered to be "for travelling in the course of an office or employment."

Supplies Consumed in the Performance of the Duties

Subparagraph 8(1)(i)(iii) of the Act provides a deduction in computing income from employment for the cost of supplies consumed directly in the performance of the duties of the office or employment when the employee is required to supply and pay for such supplies. For this purpose, the ordinary meaning of supplies and equipment apply. A supply that is consumed directly in the performance of the duties of office or employment is something which is used up as it is used and cannot normally be used more than once (or a few times). While equipment wears out over time, sometimes within a taxation year, it is expected to be used more than once with no appreciable loss of substance.

Home Office Expenses

Subsection 8(13) of the Act prohibits the deduction of office in the home expenses, unless the individual either principally performs the duties of the office or employment in the 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." For purposes of the Act generally, and in reference to subsection 8(13) of the Act in particular, the term "principally" means more than 50% of the time.

We trust our comments will be of assistance to you.

Yours truly,

Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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