19 June 2002 External T.I. 2002-0130185 - EMPLOYEE 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 CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: An employee (a commissioned salesperson) has asked about claiming an amount paid to an assistant (Paragraph 8(1)(f) of the Income Tax Act).

Position: General comments were provided.

Reasons: The issue involves a question of fact and the information provided was very limited.

XXXXXXXXXX 2002-013018
M. Eisner, CA
June 19, 2002

Dear XXXXXXXXXX:

Re: Employees - Expenses

This is in reply to your letter of March 12, 2002, concerning the above-noted subject.

You have indicated that you are an employee who is a commissioned salesperson. With respect to your employment, you have referred to form T2200 in connection with a deduction of a substitute or an assistant.

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. On the other hand, the review of ongoing circumstances, such as those in your situation, fall within the responsibility of your local Tax Services Office. However, we have proceeded to provide you with some general comments.

On the basis of the information you provided, we are providing comments on the deduction in paragraph 8(1)(f) of the Income Tax Act (the "Act") which, in broad terms, relates to individuals who are employed in connection with the selling of property or negotiating contracts for their employers and are paid by commissions. General comments on the requirements of this provision are set out in the enclosed copy of Interpretation Bulletin IT-522R "Vehicle, Travel and Sales Expenses of Employees" (paragraph 35 is of particular importance). In addition, we have enclosed a copy of our pamphlet entitled "Employment Expenses" (See Chapter 2 entitled "Employees Earning Commission Income"), which sets out comments that are of a less technical nature.

Pursuant to subsection 8(2) of 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 a number of provisions, including paragraph 8(1)(f) of the Act, employees must obtain form T2200 signed by their employer certifying that certain conditions are met. 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.

In order to qualify for a deduction under paragraph 8(1)(f) of the Act, the taxpayer must, inter alia, be required under the contract of employment to pay his or her own expenses and the amounts must have been expended by the taxpayer for the purpose of earning the employment income. In addition, in order for an expense to be deductible, it must be reasonable in the circumstances. Accordingly, if the amount paid to a substitute or assistant by a commission sales employee was expended to earn employment income and is reasonable, it would generally be deductible under paragraph 8(1)(f) of the Act, subject to the limits therein, provided that the other requirements of that provision have been met.

However, since the determination of whether a commission sales employee is entitled to deduct the cost of a substitute or assistant can only be ascertained when all the relevant facts and documentation have been reviewed (the issue can only be resolved on a case-by-case basis) and inasmuch as a signed T2200 must be obtained from the employer (the employer certifies the conditions of employment), we suggest that you provide all relevant information and documentation to the Halifax Tax Services Office for their review in order to obtain the confirmation sought.

While we regret that we could not provide you with more definitive comments, we hope the above comments will be of assistance.

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings
Policy and Legislation Branch

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