10 April 2008 External T.I. 2007-0254531E5 - Home Office Expenses

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 a deduction for home office expenses should be available.

Position: Question of fact, but in this case probably.

Reasons: The law.

XXXXXXXXXX 								2007-025453
									Michael Cooke
April 10, 2008

Dear XXXXXXXXXX :

Re: Home Office Expenses - T2200

This is in reply to your letter of September 27, 2007 in which you requested our comments as they may concern your deduction for home office expenses under paragraph 8(1)(i) and subsection 8(13) of the Income Tax Act (the "Act") and the proper completion of Form T2200, "Declaration of Conditions of Employment" ("T2200") by your employer for the 2006 tax year.

Briefly, you indicate that you are employed as a permanent full-time child protection worker during normal working hours (referred to as "Employment A"). You indicate that you are also employed by the same employer to provide similar child protection services after normal working hours (referred to as "Employment B"). In respect of your employer, normal working hours are considered to occur between 8:30 am to 4:30 pm from Monday to Friday. As such, Employment B will take place between 4:30 pm to 8:30 am from Monday to Friday and on weekends.

Persons employed to perform Employment A operate out of the employer's main office building and out of a few satellite offices throughout the city. The office buildings are not kept open after normal working hours such that each person employed to perform Employment B is required to operate out of his or her own home and in an area therein that will ensure confidentiality of his or her clients. We understand that a person may be hired to perform the duties of Employment B without being employed in Employment A and in these situations the employer is of the view that such employees will qualify for the home office expense deduction.

You also indicate that under the existing collective agreement Employment A is considered to be separate and distinct employment from Employment B (i.e. an employee may be employed concurrently in more than one position with the employer; Employment B is not considered to be overtime; and pay for such work is not based on overtime rates or rates which are equivalent to overtime rates). While the employer does not provide a separate T4 slip to an individual who is employed in both Employment A and Employment B, the employee's pay stub separately identifies the amounts earned by the employee for Employment A and Employment B.

We understand that the employer has taken the position in completing your T2200 for the 2006 tax year that you do not qualify for the home office expense deduction because the time you spent working at your employer's main office building performing the duties of Employment A is greater than the time you spent working performing the duties of Employment B at home. Accordingly, since your employer is of the view that employee who are employed in both Employment A and Employment B will not meet the "more than 50% test" described in subparagraph 8(13)(a)(i) of the Act the employer is unable to answer "yes" to the first question in section 10 of the T2200.

You want to know if you are entitled to the deduction for home office expenses under paragraph 8(1)(i) and subsection 8(13) of the Act in these particular circumstances.

Our Comments

The CRA's views on the "work space in home deduction" under paragraphs 8(1)(f) and 8(1)(i) and subsection 8(13) of the Act are explained in Interpretation Bulletin IT-352R2, "Employee's Expenses, Including Work Space in Home Expenses". As noted therein, the deduction of home office expenses otherwise deductible under paragraph 8(1)(f) or paragraph 8(1)(i) of the Act is prohibited under subsection 8(13) of the Act unless the individual either (i) principally (i.e. more than 50%) performs the duties of the office or employment in the home work space, or (ii) the home work space is used exclusively for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties. Such a determination involves a finding of fact in each case as to where a particular individual "principally performs the duties of the office or employment" in respect of such office or employment.

The term "office" is defined in subsection 248(1) of the Act to mean "...the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration...". In your particular fact situation, as described above, it appears that the parties to the particular collective agreement intended for Employment A and Employment B to be treated as two separate and distinct "offices" or "employments". Moreover, it also appears that any person performing Employment B duties could only do so from his or her home office (i.e. providing such persons do not have access to employer-owned office space during the particular Employment B period).

Based on the above-described facts, it is our view that the time spent by an employee performing the duties of Employment A at the employer's business premises can be excluded in determining whether an employee principally performs the duties of Employment B in the home work space provided that your employer and union agree that Employment A and Employment B are intended to be treated as two separate and distinct "offices" or "employments". Assuming such an agreement is reached, you would be able to deduct a reasonable amount for home office expenses under paragraph 8(1)(i) and subsection 8(13) of the Act provided such amount does not otherwise exceed the amount of your income for the year from Employment B determined before deducting those particular home office expenses (i.e. home office expenses cannot create or increase a loss for income tax purposes from the related office or employment).

We trust the foregoing comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch