8 September 2009 External T.I. 2009-0315641E5 - Ski equipment as 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: Whether ski equipment is deductible as an employment expense.

Position: Not deductible.

Reasons: Costs for ski equipment are capital expenditures and not deductible under paragraph 8(1)(f) by virtue of subparagraph 8(1)(f)(v). These costs are also not deductible under subparagraph 8(1)(i)(iii) as they are not supplies consumed directly in the performance of duties of employment.

XXXXXXXXXX 							2009-031564
								Anne Dagenais
September 8, 2009

Dear XXXXXXXXXX :

Re: Ski equipment expenses incurred by employee

This is in response to your correspondence of March 30, 2009 with respect to whether ski equipment may be deducted as an employment expense by ski instructors that earn salaries and commissions. Some employees have requested that the employer sign Form T2200, "Declaration of Conditions of Employment" ("Form T2200") in order to claim these costs as expenses against their employment income. We apologize for the delay in our reply.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Subsection 8(2) of the Income Tax Act (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 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 of the Act that authorizes the deduction.

Subparagraph 8(1)(i)(iii) provides for a deduction to employees earning a salary for "the cost of supplies that were consumed directly in the performance of the duties of the office or employment and that the officer or employee was required by the contract of employment to supply and pay for."

Interpretation Bulletin IT-352R2 - "Employee's Expenses, Including Work Space in Home Expenses", ("IT-352R2"), discusses employment expenses, which may be accessed at our website at: http://www.cra-arc.gc.ca. As stated in paragraph 1 of IT-352R2, such expenses are deductible provided the following requirements are met:

a) the taxpayer is required by the contract of employment to pay for such office rent or salary, or to provide for such supplies;

b) the taxpayer has not been reimbursed and is not entitled to reimbursement for such expenses;

c) the expenses may reasonably be regarded as applicable to the earning of income from the office of employment; and

d) in the case of supplies, they are consumed directly in the performance of the taxpayers duties of the office or employment.

Paragraph 9 and 10 of IT-352R2 goes on to indicate that supplies are limited to materials that are used up directly in the performance of the duties of the employment. However, they will not include special clothing customarily worn or required to be worn by employees in the performance of their duties; and any types of tools which generally fall into the category of equipment. We are therefore of the view that ski equipment would not fall within the meaning of "supplies that were consumed directly in the performance of the duties of the office or employment" as required under subparagraph 8(1)(i)(iii) of the Act.

The Act also provides for a deduction under paragraph 8(1)(f) (not exceeding the commissions or other similar amounts) for taxpayers employed in the year in connection ith the selling of property or negotiating of contracts for the taxpayer's employer, where the taxpayer:

• Was required to pay his own expenses under the contract of employment;
• Was ordinarily required to carry on the duties of employment away from the employer's place of business;
• Was remunerated in whole or in part by commission or other similar amounts fixed by reference to the volume of the sales made or the contracts negotiated; and
• Was not in receipt of a travel allowance in the year that was excluded from the taxpayer's income under subparagraph 6(1)(b)(v) of the Act.

We have not been provided with sufficient details of the working arrangements of the ski instructors as to whether they would meet all of the conditions outlined above. However, subparagraph 8(1)(f)(v) specifically excludes outlays, losses or replacements of capital or payments on account of capital, except as those described in paragraph 8(1)(j) (motor vehicle and aircraft costs). In our view, the cost for ski equipment represents payments on account of capital. The CRA's views are outlined in the guide T4044: "Employment Expenses" under the heading "Employees earning commission income". It states: "You cannot deduct the cost of special clothing you wear or have to wear for your work. Generally, you cannot deduct the cost of any tools that are considered to be equipment".

We are therefore of the view that expenses incurred for ski equipment are not deductible employment expenses under paragraph 8(1)(f) or subparagraph 8(1)(i)(iii), nor within any of the other permissible deductions listed in section 8 of the Act.

We trust that our comments are of assistance to you.

Yours truly,

Rob Ferrari
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch