28 March 2006 External T.I. 2005-0157201E5 - Motor Vehicle Expenses for Self-Employed

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: Deductibility of expenses to travel from home office by self-employed individual.

Position: Where a self-employed individual, whose home office is their primary place of business, incurs motor vehicle expenses in the course of earning business income, such expenses are deductible subject to other provisions of the Income Tax Act. It is a question of fact whether an individual is self-employed, and is eligible to deduct home office expenses under 18(12) of the Act.

Reasons: Consistent with Agency policy.

								2005-015720
XXXXXXXXXX 							Darlene Green
(613) 957-2082
March 28, 2006

Dear XXXXXXXXXX

Re: Technical Interpretation Request: IT-521R - Paragraph 24

This is in response to your correspondence of November 3, 2005, in which you request an interpretation of whether your client, who is a truck driver that does not own the truck used in his business and is not responsible for its operating expenses, meets the conditions described by example C as set out in paragraph 24 of Interpretation Bulletin IT-521R - Motor Vehicle Expenses Claimed by Self-Employed Individuals, and is therefore eligible to claim motor vehicle expenses to drive his own vehicle between his home and the location where the truck is stored.

As outlined in IT-521R, a self-employed individual who is eligible to deduct home office expenses under subsection 18(12) of the Income Tax Act (the "Act") would also be eligible to deduct motor vehicle expenses incurred in the course of earning business income, subject to other provisions of the Act. As noted in Interpretation Bulletin IT-514 - Work space in home expenses, expenses related to a home office may be deducted where the work space is either (i) the principal place of the business of the individual, or (ii) used exclusively to earn business income and on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business.

An individual who is not self-employed would not be entitled to deduct motor vehicle expenses to drive to and from work. In the context of the information you provided, it is difficult to envisage how your client, who does not own or incur expenses for what is seemingly the only asset used to earn income, could possibly meet the requisite elements necessary to be considered self-employed (control; ownership of tools; chance of profit/risk of loss; and integration). For more information in this regard please refer to our guide RC4110 - Employed or Self-Employed? available on our website at http://www.cra-arc.gc.ca/E/pub/tg/rc4110/rc4110-e.html.

We trust that our comments will be of assistance to you.

Yours truly,

Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch