25 May 2001 External T.I. 2001-0078315 - relocation expenses

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:

Whether certain relocation expenses paid by the employer would be considered a taxable benefit to the employee.

Position: Likely no.

Reasons: Where an employer pays or reimburses an employee for reasonable temporary living expenses while waiting to occupy the new, permanent accommodation, the employers guide to taxable benefits T4130 indicates that such a payment or reimbursement will generally not constitute a taxable benefit to the employee.

		2001-007831
XXXXXXXXXX 	Karen Power, C.A.
(613) 957-8953
May 25, 2001

Dear XXXXXXXXXX:

Re: Relocation Expenses

We are writing in reply to your letter of February 26, 2001 requesting our comments on whether the reimbursement of certain relocation expenses by an employer would be considered a taxable benefit to the employee. We understand that XXXXXXXXXX recently hired a new employee and agreed to cover lease cancellation payments with respect to the employee's old residence located more than 40 kilometers away from his new employment. Rather than pay the lease cancellation amount, XXXXXXXXXX has agreed to cover the cost of renting a room in a boarding house for a period of six months at which time the lease at the employee's old residence will expire. XXXXXXXXXX has concluded that this arrangement would be a less expensive option. In addition XXXXXXXXXX has agreed to cover weekly traveling expenses (mileage) to the employee's old residence, which is currently being used as temporary storage for personal effects and to which the employee must travel once a week to ensure that the property is secure to maintain insurance coverage.

Our Comments:

Your request relates to a completed transaction involving a specific taxpayer. Confirmation of the income tax consequences of completed transactions involving specific taxpayers will only be provided where the request is made to the particular taxpayer's local CCRA Tax Service Office and all the relevant facts and information are provided. Confirmation of the income tax consequences of proposed transactions involving specific taxpayers will only be provided in response to a request for an advance income tax ruling that is submitted in accordance with the guidelines set out in Information Circular 70-6R4 ("IC 70-6R4") dated January 17, 2001. Notwithstanding the above, we are prepared to offer the following general comments.

Taxpayers are generally taxable on the value of all benefits they receive by virtue of their employment. An administrative exception to this general rule is provided in paragraph 35 of IT-470R, "Employees Fringe Benefits (Consolidated)" which provides that no taxable benefit is imputed where an employer reimburses an employee for the expenses incurred in moving the employee and the employee's family and household effects as a result of a transfer from one establishment of the employer to another or because the employee accepted employment at a place other than where the former home was located. A detailed list of which items when paid by an employer are not considered to result in a taxable benefit can be found in the Employer's Guide to Payroll Deductions - Taxable Benefits T4130. This list indicates that fees paid by an employer for reasonable temporary living expenses while waiting to occupy the new, permanent accommodation will not be considered a taxable benefit to the employee.

Subsection 6(23) of the Income Tax Act (the "Act") provides that an amount paid or the value of assistance provided by any person in respect of, in the course of or because of, an individual's office or employment in respect of the cost of, the financing of, the use of or the right to use, a residence is a benefit received by the individual because of the office or employment.

In our view, the reimbursement of costs for temporary accommodation in a boarding house would not fall within the purview of subsection 6(23) of the Act.

With respect to the reimbursement of weekly traveling expenses, such amounts do not fall within the ambit of the administrative practice outlined above. Whether or not an employee is receiving a benefit when their employer pays or reimburses an expense incurred by the employee is a question of fact and can only be determined on a case-by-case basis upon review of all the relevant facts. To the extent that the employee can be considered to have received a benefit as a result of the employer paying or reimbursing the expense such benefit would be taxable pursuant to paragraph 6(1)(a) of the Act.

We trust our comments will be of assistance to you. These comments are provided in accordance with the practice outlined in paragraph 22 of IC 70-6R4.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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