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: Should the Employer treat the amounts paid to employees with respect to the replacement of the employees tools used in the Employer's business as a taxable benefit.
Position: Yes, whether or not the amounts paid are reimbursements or allowances.
Reasons: The payment represents a benefit received by virtue of the employer-employee relationship.
2005-011744
XXXXXXXXXX Luisa A. Majerus, CA
(613) 832-3488
April 21, 2005
Dear XXXXXXXXXX:
Re: Cost of Tools Replacement
This is in reply to your letter dated February 18, 2005, requesting confirmation on the treatment of the replacement cost for tools. Specifically, XXXXXXXXXX, the Employer, has a policy that payments, made by the Employer for tools that an employee is required to have in order to perform their work, must be included in the employee's income. Amounts may be paid as a reimbursement or in the form of an allowance form the Employer to the employees. The Employer is requesting confirmation that these amounts represent a taxable benefit to the employees.
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, 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. However, we offer the following general comments.
Generally, where an employer makes a payment that is a reimbursement or an allowance to an employee with respect to the replacement of the employees' tools used in the employer's business, it is our view that the payment represents a taxable employment benefit. This is a longstanding CRA position. Please refer to our document 9237105 (E), a copy of which is enclosed.
We trust this information meets your needs at the current time.
Yours truly,
John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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