14 November 2003 External T.I. 2003-0034145 - MOTOR VEHICLE EXPENSE

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 employees can deduct their travel expenses when they travel from home to a particular work place.

Position: No.

Reasons: Travel from home to a regular place of work is personal.

XXXXXXXXXX 2003-003414

P. Massicotte, CA, M.Fisc.

November 14, 2003

Dear XXXXXXXXXX:

Re: Travelling Expenses

This is in response to your letter of August 7, 2003, requesting our comments in connection with the deduction of motor vehicle expenses of employees in the specific situation submitted with your request.

The facts as we understand them are as follows:

1. XXXXXXXXXX has its administrative office located in XXXXXXXXXX, Ontario.

2. XXXXXXXXXX has a wholly owned subsidiary, XXXXXXXXXX which is located in XXXXXXXXXX, Ontario.

3. For the majority of 2002, a group of employees of XXXXXXXXXX (the "XXXXXXXXXX employees") were assigned to work at the office of XXXXXXXXXX, in XXXXXXXXXX (the "XXXXXXXXXX work place") rather than at the office of XXXXXXXXXX, in XXXXXXXXXX.

4. During that period, the XXXXXXXXXX employees were not required to report for work at the office of XXXXXXXXXX, in XXXXXXXXXX, and they travelled directly to XXXXXXXXXX. In addition, these employees were not ordinarily required to travel away from the office of XXXXXXXXXX during the workday.

5. During that period, the XXXXXXXXXX employees incurred motor vehicle expenses for travelling from their home to the office of XXXXXXXXXX in XXXXXXXXXX every day. They have not been reimbursed and have not received any allowance for any of these travel expenses.

You ask whether the XXXXXXXXXX employees in the above circumstances may be allowed a deduction, pursuant to paragraph 8(1)(h.1) of the Act, for the motor vehicle expenses they incurred to travel from home to the XXXXXXXXXX work place.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments which may be of assistance.

As you may know, an employee may only deduct in determining income from employment those reasonable outlays and expenses that are specifically permitted under section 8 of the Act. A deduction for amounts expended by employees in a year in respect of motor vehicle expenses incurred for travelling in the course of an office or employment is allowed under paragraph 8(1)(h.1) of the Act where inter alia the employee is:

(i) ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places, and

(ii) required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment.

As indicated in paragraphs 14 and 49 of Interpretation Bulletin IT-522R, "Vehicle, Travel and Sales Expenses of Employees" (an electronic copy of which may be found on the Internet at: www.ccra-adrc.gc.ca), it is generally our position that travelling between an employee's home and the place where he or she regularly reports for work is personal and not considered "travelling in the course of the office or employment". Amounts expended in respect of travel between home and a regular place of work are therefore not deductible under paragraph 8(1)(h.1) of the Act.

Whether an employee regularly reports for work at a particular location is a question of fact requiring a review of all the relevant facts of each case. An employee who reports to work at a particular location for an extended period of time will likely be considered to regularly report to work at such location. In addition, it is our opinion that an employee may have more than one regular place of employment and, in fact, it is the nature of some employment situations that more than one location may be viewed as a regular workplace.

The following comments relating to the "employer's place of business" in the decision of Lorne Nelson v. MNR, 81 DTC 190 (TRB), are also relevant (at p.192):

"It appears to be logical ..., to consider that the "employer's place of business" as used in section 8(1)(h)(i) of the Act, does not necessarily refer to the employer's head office or any of its administrative offices but refers specifically to that establishment of the employer for which the taxpayer was hired, to which he was assigned and at which he ordinarily reports for work. In other words, the "employer's place of business" should in my opinion be interpreted in relation to the taxpayer."

Based on the limited facts described above, it appears that the XXXXXXXXXX employees regularly reported for work at the XXXXXXXXXX work place during the year 2002. As a result, it is our opinion that the expenses incurred for travelling between home and the XXXXXXXXXX work place would not be considered expenses incurred for "travelling in the course of the office or employment", but would rather be personal and non-deductible.

We trust the above comments are of assistance to you.

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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