21 September 2000 External T.I. 2000-0040485 - NORTHERN RESIDENTS DEDUCTION

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: Can an employer designate or reclassify an existing portion of an employee's wages as a Northern Travel Benefit.

Position: Generally no

Reasons: Generally, there must be a link between the travel incurred and the amount paid by the employer.

XXXXXXXXXX 2000-004048
M. Eisner
Attention: XXXXXXXXXX

September 21, 2000

Dear XXXXXXXXX:

Re: Northern Residents Deduction

This is in reply to your letter of July 12, 2000, concerning the above-noted subject.

XXXXXXXXXX

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 advance income tax ruling request in the manner set out in Information Circular 70-6R3, dated December 30, 1996 (copy enclosed). However, we are prepared to offer the following general comments.

The deduction in respect of employee travel benefits provided in paragraph 110.7(1)(a) of the Act. In general terms, the deduction offsets the income inclusion in respect of benefits provided by an employer to an employee or the employee's family with respect to trips made for the purpose of obtaining necessary medical services not available locally or with respect to travelling expenses in connection with not more than two other trips per year.

In order for the amounts paid by an employer to be "...in respect of travel expenses incurred by the taxpayer..." as required by paragraph 110.7(1)(a) of the Act, there must be a connection between the actual travel expenses incurred by a taxpayer or a member of a taxpayer's household and the amounts paid by the taxpayer's employer to defray those costs. Generally such amounts are paid by an employer by reimbursement after the trip. However, the Canada Customs and Revenue Agency has accepted that an employer can pay a reasonable travel allowance before a trip, such as a certain amount per hour provided the details of such an employee benefit are specified in an employment contract.

However, in relation to the information you provided, it is our general view that the simple re-characterizion or designation of existing salary or wages would not result in an amount being paid in respect of travel expenses. It follows that an amount of an employee's remuneration should not be added to box 14, code 32 of the T-4 slip as it would generally not be considered to be in respect of "travel expenses incurred by the taxpayer".

We trust that our comments are of assistance to you.

Yours truly,

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

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