21 November 2008 External T.I. 2008-0289311E5 - Special Work Site

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: An employee contributes to expenses of his parents' principal residence. Can this be regarded as meeting the requirement in subparagraph 6(6)(a)(i) that the employee maintained a self-contained domestic establishment at another location.

Position: No.

Reasons: For the purposes of subsection 6(6) the employee does not have any legal obligation to maintain his/her parent's home during the particular work period. Moreover, the employee does not appear to have any right or entitlement to occupy the particular property throughout the particular work period.

XXXXXXXXXX 							2008-028931
								Michael Cooke
November 21, 2008

Dear XXXXXXXXXX :

Re: Employment at a Special Work Site

We are writing in response to your letter dated July 28, 2008, wherein you requested clarification of the requirements to claim the "special work site" income exclusion under subsection 6(6) of the Income Tax Act (the "Act").

In your letter you describe a situation where, in your view, an employee otherwise meets the requirements for the "special work site" income exclusion under subsection 6(6) of the Act but for the fact that the employee lives with his parents and therefore does not own or rent a self-contained domestic establishment as a principal place of residence. However, you ask if this requirement is met if the employee contributes to the house expenses incurred by his parents.

The particular fact situation outlined in your correspondence appears to involve a completed transaction. This Directorate does not provide written interpretations involving completed transactions since, as mentioned in paragraph 22 of Information Circular IC 70-6R5, "Advance Income Tax Rulings", dated May 17, 2002, such requests should be made in writing to the appropriate Canada Revenue Agency ("CRA") tax services office ("TSO"), a list of which is available on the "Contact Us" page of the CRA website. Notwithstanding the foregoing, we are prepared to provide the following general comments.

Subsection 6(6) of the Act may apply, inter alia, to exclude from income of an employee the value certain benefits that would otherwise be considered as personal or living expenses where such amounts are related to duties performed by the employee at a "special work site". One of the requirements under subparagraph 6(6)(a)(i) of the Act that must be met in order for this exclusion to apply is that the employee must maintain at another location, a self-contained domestic establishment that is the employee's principal place of residence. Moreover, under clause A of that subparagraph the employee's principal place of residence must continue to be available for the employee's occupancy throughout the period the employee is otherwise performing the duties of employment at the temporary work location (i.e. the employee's principal place of residence can't be rented to any other person).

The purpose of paragraph 6(6)(a) of the Act is to recognize that where an employee takes on a temporary work assignment at a location that is sufficiently distant from where the employee otherwise ordinarily resides, it is not reasonable to expect the employee to dispose of his or her principal place of residence and move to the new temporary work location for a short period of time. This provision further recognizes that where the employee continues to incur the cost of maintaining the principal place of residence without any offsetting rental revenue for the particular period, a benefit is not being conferred on the employee if the employer provides an allowance or pays for the cost of board and lodging at the special work site.

As such, paragraph 6(6)(a) of the Act is intended to provide relief to those employees who continue to be responsible for a principal place residence at another location while employed at a temporary work location. This would include employees who own their own home and who continue to incur expenses such as taxes, utilities, mortgage payments, etc. while employed at a temporary work location as well as employees who continue to be responsible for lease obligations such as rent while employed at a temporary work location given that, under the circumstances, selling the home or giving up the rental property might not be reasonable or practical.

Accordingly, in the context of subparagraph 6(6)(a)(i) of the Act, the term "maintained" should be interpreted as meaning that the employee actually owns or rents a self-contained domestic establishment that is his or her principal place of residence and is responsible for its upkeep. Where an employee is not the owner or lessee (or co-owner/co-lessee) of a self-contained domestic establishment but rather only contributes to certain expenses of another person's self-contained domestic establishment, it is our view that the conditions of subparagraph 6(6)(a)(i) of the Act have not been met.

Furthermore, in the situation described in your letter, it appears unlikely that the employee has a legal right or entitlement to otherwise occupy the particular property, such that it is arguable that it is available for his occupancy only as a matter of convenience. This may also factor into whether the conditions of subsection 6(6) of the Act have been met.

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