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: Whether an employer has reasonable grounds to issue a T2200 to an employee
Position: No. It is a question of fact to be determined upon a review of the circumstances.
Reasons: Council members are in receipt of a tax-free allowance for expenses incident to the discharge of their duties. Accordingly, they have in effect been reimbursed for their home office expenses and a further tax deduction is not allowed. Therefore, T2200s should not be issued.
2005-013169
XXXXXXXXXX Charles Rafuse
613-957-8967
June 16, 2005
Dear XXXXXXXXXX:
Re: When to Issue T2200
This is in reply to your letter of April 6, 2005, concerning when an employer has reasonable grounds to issue a T2200 to an employee.
Specifically, you have indicated that one of your Council members has requested a T2200 indicating that he was required under a contract of employment to use a portion of his home as an office in fulfilling his duties. Other Council member agree that they perform more than 50 per cent of their municipal work at home and the Councillor wants the Council to approve a requirement set out in a contract indicating that Councillors are to provide a home office. You have also indicated that the council members have one-third of their remuneration deemed as tax-free to cover expenses.
The particular circumstances in your letter on which you have asked for our views pertain to a factual situation. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions other than in the form of an advance income tax ruling. Regarding situations involving completed transactions, all relevant facts and documentation should be submitted to the local tax services office for their views. However, we are prepared to offer the following general comments, which may be of assistance.
A deduction for office space in the home expenses is allowed under subparagraphs 8(1)(i)(ii) and (iii) of the Income Tax Act (the "Act"). Generally, an employee in computing income for a taxation year, is allowed to deduct amounts paid for office rent, supplies and salary to an assistant or substitute. Subject to certification by the employer, these expenses are deductible provided the employee is required by contract of employment to supply and pay them and has not been reimbursed and is not entitled to be reimbursed for them.
Form T2200, Declaration of Employment, pursuant to Subsection 8(10) of the Act, is the prescribed form which must be signed by an employer certifying that the required conditions were met in order to claim deductions under paragraphs 8(1)(a),(f),(h),or (h.1), as well as subparagraphs 8(1)(ii) or (iii). Since the form is used for various types of expenses that may be claimed by an employee, some of the questions on the form may not be applicable to a particular situation
As explained above, home office expenses are not deductible where a taxpayer has been reimbursed or is entitled to be reimbursed for such expenses. It is our view that since Council members receive a tax-free allowance for expenses incident to the discharge of their duties they have in effect been reimbursed for their home office expenses and they would not entitled to claim a deduction for such expenses. Therefore, it is our opinion that there is no basis for issuing T2200s for Council members.
We trust this information is helpful.
Yours truly,
Charles Rafuse
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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