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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether following programs fall within our guidelines on employment-related training in TN#13.
1) Employer provides employee with $XXXXXXXXXX account that can be drawn on to enhance the employees learning or health and wellness needs. As one qualifying use, it can be applied against the purchase cost of a personal computer for the employee.
2) Employer provides interest-free loans to employees to enable them to purchase personal computers and related software.
Position: Neither program falls within guidelines. Employees participating would be considered to have received taxable employment benefits.
Reasons: 1) It has not been established that the purpose of the program was to provide employees with personal computers to develop their computer skill, that the primary beneficiary of any training is the employer, or that the account is not a form of remuneration.
2) Debts incurred as a consequence of employment are taxed under subsections 6(9) and 80.4(1) of the Act. The guidelines in TN13 do not apply to such loans.
October 15, 2001
XXXXXXXXXX Tax Services Office HEADQUARTERS
Client Services Division Wayne Antle
XXXXXXXXXX (613) 957-2102
2001-009049
Employee Computer Purchase Programs
This is further to your letter of June 27, 2001 concerning the tax consequences to employees participating in employee computer purchase programs offered by two different employers.
In the first program, offered to employees of XXXXXXXXXX, employees are provided with an annual $XXXXXXXXXX "learning account" which is to be used for either assistance in becoming more employable, professional or personal development, or support of health and wellness needs. This funding could be used for a number of purposes including being applied towards the purchase of computer hardware or professional software.
The second program, open to employees of XXXXXXXXXX, provides employees with interest-free loans to facilitate the purchase of personal computers and software. In light of previous advance income tax rulings allowing employers to provide, on a tax-free basis, computer hardware, software, and internet access to employees, you are requesting our comments on the above programs.
In the past, we have considered several programs whereby employers provided their employees with personal computers, printers, software, and internet access for the purpose of developing their employees' computer and internet skills. After examining all of the facts and documentation, we concluded that the programs were consistent with our guidelines in Income Tax Technical News No. 13 ("TN13") on employment-related training. The computers were provided as a training vehicle, and the primary beneficiary of this training was the employer. The programs had the following common characteristics:
1) The employers felt that it was critical for their future success that all employees become computer literate as soon as possible.
2) The employers also felt that the most efficient and effective way to develop their employees' computer and internet skills was to provide them with computers for use in their homes;
3) The programs were available to all employees;
4) The employers leased or purchased the computers, and had them delivered directly to the employees;
5) The employees could not transfer or sell the computer for a set period of time;
6) Employees who chose not to participate in the programs were not entitled to any compensation in lieu of their participation;
7) The programs were initiated by the employers and were not part of any collective bargaining process.
We recognize that programs offered by different employers may have certain unique characteristics. Where an employer is proposing to implement a program to provide computers to its employees for the purpose of developing their computer skills, we will consider such a program in the context of an advance income tax ruling request.
With respect to the XXXXXXXXXX program, where the employer pays a portion of the employee's purchase cost of a personal computer or personal software, it is our view that this payment would likely constitute a taxable employment benefit to the employee. In order for such a program to fall within our guidelines in TN13 on employment-related training, it must be established that the employer is providing personal computers and related software to its employees for the principal purpose of developing their computer skills, that the primary beneficiary of this training is the employer, and that the computers and related software are not being provided as a form of remuneration. This can only be determined after reviewing all of the facts and documentation including the structure of the program, the nature of the employer's activities, and the history of the program's development.
With respect to the second program, offered to the employees of XXXXXXXXXX, our policy on employment-related training does not encompass any benefits derived from interest-free loans given to employees by their employer. Subsection 6(9) of the Income Tax Act (the "Act") includes in employment income any amount deemed to be a benefit under subsection 80.4(1) of the Act in respect of a loan or debt. Subsection 80.4(1) provides a formula for calculating a taxable employment benefit, where an individual receives a loan or incurs a debt because of his or her employment. The calculation of the benefit is discussed and illustrated in IT-421R2 entitled Benefits to Individuals, Corporations, and Shareholders from Loans or Debt. The application of this provision is not dependant on the use made of the funds by the employee (other than funds used to purchase a home in certain circumstances). Accordingly, the employees of XXXXXXXXXX who receive an interest-free loan to purchase a personal computer will be deemed to have received a taxable benefit computed in accordance with subsection 80.4(1) of the Act.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613)957-0682. The severed copy will be sent to you for delivery to the client.
We trust that our comments will be of assistance.
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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