17 November 2008 External T.I. 2008-0287721E5 - Northern Residents Deduction/Remote Work Location

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: The taxpayer wants to know if he qualified for the Northern Residents Deduction for the 2007 taxation year.

Position: No.

Reasons: While we had very few facts, it appears that the taxpayer did not live in a prescribed northern zone for any qualifying period. However, the particular work location may qualify as a Remote Work Location.

XXXXXXXXXX 								2008-028772
									Michael Cooke
November 17, 2008

Dear XXXXXXXXXX :

Re: Northern Residents Deduction

We are writing in response to your letter dated July 18, 2008, wherein you requested confirmation of your ability to claim a northern residents deduction pursuant to subsection 110.7(1) of the Income Tax Act (the "Act") for the 2007 taxation year.

You indicate that you are employed at a XXXXXXXXXX ("Work Site") that is located XXXXXXXXXX in the Northwest Territories and that your employer pays all expenses related to your meals and lodging while working at the Work Site as well as all expenses for travel between your principal residence in XXXXXXXXXX and the Work Site. We do not know if these amounts have been included on your T4 slip as taxable benefits for the 2007 taxation year.

Since the situation outlined in your letter relates to a factual one involving a specific taxpayer you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the Canada Revenue Agency's website. However, we are prepared to offer the following general comments.

In computing an individual's taxable income for a taxation year, section 110.7 of the Act provides a special deduction in respect of certain travel benefits and living costs where the individual resides, throughout a period of at least 6 consecutive months commencing or ending in the year (referred to as the "qualifying period"), in a "prescribed northern zone" or a "prescribed intermediate zone" (collectively referred to as a "prescribed zone") as defined in section 7303.1 of the Income Tax Regulations. A listing of places that are considered to be prescribed zones for these purposes can be found in Guide T4039: "Northern Residents Deductions - Places in Prescribed Zones".

Whether or not an individual meets the conditions of subsection 110.7(1) of the Act for a particular taxation year can only be determined after a review of all of the relevant facts. Paragraphs 19 to 21 of Interpretation Bulletin IT-91R4, "Employment at Special Work Sites or Remote Work Locations" discusses the conditions that must be satisfied in order to claim the northern residents deduction as well as the interaction between this deduction and the "special work site" or "remote work location" exclusions in subsection 6(6) of the Act, discussed below. In order to claim the northern residents deduction, the individual must file a claim in prescribed form (Form T2222, "Northern Residents Deductions") for the particular taxation year. The foregoing publications and forms may be obtained from Canada Revenue Agency's web site at www.cra-arc.gc.ca.

All places located in the Northwest Territories qualify as a prescribed northern zone. However, since you have indicated that you regularly return to your principal place of residence in XXXXXXXXXX (which is not located in a prescribed zone) for a period of XXXXXXXXXX , it is our view that you would not be entitled to a northern residents deduction since you have not resided in a prescribed zone throughout any qualifying period.

Notwithstanding the above, it is possible that your employment at the Work Site may qualify as a "remote work location" for the purposes of subsection 6(6) of the Act. Paragraphs 12 to 18 of IT-91R4 discuss all the conditions that must be satisfied in order to claim this particular exemption. Briefly, subsection 6(6) of the Act allows the value of, or an allowance received in respect of expenses incurred by an employee for, board and lodging, for a period at a remote work location to be excluded from employment income where the following requirements are met:

1) the employee must have worked at a remote work location at which, by virtue of its remoteness from any established community, the employee could not reasonably be expected to have established and maintained a self-contained domestic establishment; and

2) the period during which the employee was required by his or her duties to be at the remote work location was at least 36 hours.

The term "self-contained domestic establishment" is defined in subsection 248(1) of the Act as a dwelling-house, apartment or other similar place of residence where a person generally sleeps and eats. A residence is considered to be a self-contained domestic establishment if it is a living unit with restricted access that contains a kitchen, bathroom and sleeping facilities. A room in a hotel, dormitory, boarding house or bunkhouse would not ordinarily be a self-contained domestic establishment.

Provided that you do not maintain a self-contained domestic establishment at the particular Work Site and the Work Site is not located closer than 80 kilometers (by the most direct route) from an "established community" with a population of 1,000 or more then it would appear to qualify as a "remote work location". This would mean that the value of employer-provided meals, lodging and travel expenses to and from the Work Site (to the extent that such amounts are otherwise reasonable) could be excluded from your income.

We recommend that you contact your employer to ascertain whether the above-described amounts have been excluded from your T4 slip for the particular taxation year on the basis that the Work Site qualified as a "remote work location". Any further questions concerning this matter should be directed to your local TSO.

We trust the above comments are of assistance.

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