26 September 2008 External T.I. 2008-0276151E5 - Employment 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: What are the requirements for filing a T2200 as they relate to a salaried employee's employment

Position: General comments on deductibility. Form T2200 must be completed if the employee is required to pay for certain items under the contract of employment.

Reasons: Question of fact and the law.

XXXXXXXXXX 							2008-027615
								Michael Cooke
September 26, 2008

Dear XXXXXXXXXX :

Re: Technical Interpretation Request -T2200 and deductibility of expenses

We are writing in response to your correspondence dated April 24, 2008, wherein you asked for our views on the deductibility under the Income Tax Act (the "Act") of employment-related expenses incurred by a provincially appointed Justice of the Peace, such as motor vehicle expenses, office supplies and the use of a home office and the requirement to file a T2200 Form in support of such deductions.

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.

Our Comments

As a preliminary comment, we note that the term "office" is defined in subsection 248(1) of the Act, and means the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration, and includes inter alia, a judicial office. An "officer" means a person holding such an office and the definition of "employee" in subsection 248(1) of the Act includes an officer.

Subsection 8(2) of the Act provides that no deductions are allowed in computing a taxpayer's income for a taxation year from an office or employment except as specifically enumerated in section 8 of the Act. In addition, subsection 8(10) of the Act requires the employer to sign the prescribed form T2200, certifying that the particular expenses were required to be incurred by the employee and that the employee meets the requirements of the particular provision in section 8 that authorizes the deduction.

The Canada Revenue Agency's ("CRA") views on the deductibility of employment-related expenses for salaried employees, including those related to motor vehicle travel expenses, office supplies and work space in the home expenses are outlined in Chapter 3 of the Employment Expenses Guide ("T4044"). This publication and other CRA publications may be accessed at our website at: http://www.cra-arc.gc.ca.

In respect of deductions for motor vehicle travel expenses under paragraph 8(1)(h.1) of the Act, the courts and the CRA generally agree that travel between an employee's home and the place of regular employment is personal, irrespective of the distance travelled. We note that a person can have more than one regular place of employment. Motor vehicle expenses incurred for personal travel are not deductible. For more information on motor vehicle expenses you should refer to Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees.

In respect of deductions for expenses related to a salaried employee's work space in the home under subparagraph 8(1)(i)(ii) of the Act or for office supplies under subparagraph 8(1)(i)(iii) of the Act, the employee must be required under the contract of employment to use a home office and/or pay for such employment-related expenses. Assuming this preliminary requirement is met, it is the CRA's view that the cost of long-distance telephone calls and cellular telephone calls (i.e. airtime) that reasonably relate to the earning of employment income qualify as office supplies under subparagraph 8(1)(i)(iii) of the Act. Employment use would not include phone calls to home or other personal calls. It is also the CRA's view that the monthly basic rate for a telephone line or the cost to connect or license a cellular telephone are not supplies that could qualify for a deduction under subparagraph 8(1)(i)(iii) of the Act.

In respect of expenses related to the work space in the home deduction, subsection 8(13) of the Act provides that no amount is deductible unless the particular work space is where the employee mainly (i.e. more than 50% of the time) performs the duties of such employment or the work space is used by the employee on a regular and continuous basis for meeting clients or customers. It will remain a question of fact as to whether either requirement would be met in a particular situation. For more information on the deductibility of work space in the home expenses and of supplies consumed in performing employment duties you should refer to Interpretation Bulletin IT-352R2, Employee's Expenses, Including Work Space in Home Expenses.

The employer is not required to complete or sign the T2200 if the employer knows that the conditions for deducting the above-described expenses have not been met. However, we would expect employers to complete a T2200 in situations where the employees have reasonable grounds to make the related claims and there is an express or implied requirement in the employment contract for the employee to work at home and/or pay the particular employment expenses in question. In order to determine if an expense incurred by an employee, that was not expressly required in the contract, was actually an implied requirement of the office or employment, the courts have reviewed whether the failure to meet the requirement could result in the cessation of employment, poor performance evaluation or other disciplinary action on the part of the employer. This is a question of fact to be determined upon a review of the particular circumstances.

Lastly, issues involving the proper completion of the T2200 are usually resolved by a mutual agreement between the employer and employee and the employee's union, where applicable. In situations where the parties are unsure whether an employee can deduct certain employment related expenses, and therefore, whether the employer should complete the T2200, the parties are encouraged to contact their local Tax Services Office for assistance.

We trust that these comments will be of assistance.

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