3 August 2004 External T.I. 2004-0076281E5 - Employer-Paid Commuting Assistance

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.

Principal Issues: An employer provides employees who work at an airport with tickets for an airport shuttle because of a lack of public transportation between the airport and the city. At times, employees are required to work when the shuttle is not available and therefore, the employer pays for a taxi to transport the employees between their home and the airport. Whether or not the airport shuttle tickets and employer-paid taxi fares will result in taxable employment benefits for the employees.

Position: These are generally taxable employment benefits but there is an administrative exception.

Reasons: The administrative position is that such employer-paid or reimbursed commuting expenses are not a taxable employment benefit where an employee is required to work overtime under certain conditions, as follows: the employee is required to work at least three hours in addition to and immediately subsequent to the regular hours of work; public transportation is not available or the physical safety of the employee is at risk at the time of travel; and the occurrence of such overtime is occasional.

XXXXXXXXXX 2004-007628
Kathryn McCarthy, CA
August 3, 2004

Dear XXXXXXXXXX,

Re: Employer-Paid Commuting Assistance

We are writing in response to your e-mail of May 13, 2004, concerning the above-noted issue.

You described a situation in which an employer provides employees who work at an airport with tickets for an airport shuttle because of a lack of public transportation between the airport and the city. At times, employees are required to work when the shuttle is not available and therefore, the employer pays for a taxi to transport the employees between their home and the airport. You inquired whether the airport shuttle tickets and employer-paid taxi fares will result in taxable employment benefits for the employees.

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 ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.

Generally, travel between an employee's personal residence and the employer's place of business where the employee ordinarily reports for work is considered personal in nature. Where an employer reimburses an employee for such a personal expense or pays for the expense directly, it will result in a taxable employment benefit under the Income Tax Act. We are therefore of the view that the airport shuttle tickets and employer-paid taxi fares described above are a taxable benefit, the value of which must be included in the employees' income.

We would note, however, that the Canada Revenue Agency has taken the administrative position that such employer-paid or reimbursed commuting expenses are not a taxable employment benefit where an employee is required to work overtime under certain conditions, as follows:

1) the employee is required to work at least three hours in addition to and immediately subsequent to the regular hours of work;

2) public transportation is not available or the physical safety of the employee is at risk at the time of travel; and

3) the occurrence of such overtime is occasional.

As a result, there may be circumstances where some employer-paid taxi fares described above will not be required to be included in the employees' income when these conditions are met. It should be noted, however, that this administrative position does not apply to travel as a result of the employee being called to return to work.

For further information see the T4130, Employer's Guide Taxable Benefits 2003-2004 and Interpretation Bulletin IT-470R (Consolidated), Employee's Fringe Benefits, which are available on our website at www.cra-arc.gc.ca.

We trust our comments will be of assistance to you.

Yours truly,

Randy Hewlett, B. Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch