19 January 2010 External T.I. 2009-0334751E5 - Employee Motor Vehicle 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: Meaning of the word ordinarily.

Position: Generally, it does require some frequency but it must be interpreted with a purposive approach to take into account the specific facts and how it is used in the particular provision.

Reasons: The law.

XXXXXXXXXX 								2009-033475
									Michael Cooke, C.A.
January 19, 2010

Dear XXXXXXXXXX

Re: Employee Motor Vehicle Expenses

This is in response to your letter dated July 24, 2009, wherein you asked for clarification of the meaning of the word "ordinarily" as it is used in paragraph 8(1)(h.1) of the Income Tax Act (the "Act") and the completion of Form T2200 - Declaration of Conditions of Employment as it relates to various scenarios.

Our Comments

The situations outlined in your letter appear to involve specific taxpayers. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the transactions are completed and involve specific taxpayers you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSO's is available on the "Contact Us" page of the Canada Revenue Agency's ("CRA") website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.

A deduction for amounts expended by an employee in a year in respect of motor vehicle expenses incurred for travelling in the course of an office or employment is allowed under paragraph 8(1)(h.1) of the Act where, inter alia, the employee is:

(i) ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places, and

(ii) required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment.

As indicated in paragraphs 14 and 49 of Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees, travel between an employee's home and the place where that employee regularly reports for work is generally considered to be personal travel and not employment-related travel. Any location at or from which an employee regularly reports for work or performs the duties of employment, is considered to be a regular place of employment. An employee who reports to work at a particular location for an extended period of time will likely be considered to regularly report to work at such location. In addition, it is the CRA's view that an employee may have more than one regular place of employment and that a particular work location may be considered to be a regular place of employment even though the employee may only report to work at that particular location on a periodic basis (e.g., once or twice a month) during the year. However, we would note that where an employer has more than one business location and an employee is required to travel from one business location to another business location, such travel is considered to be employment-related travel.

You have asked for clarification of the meaning of the word "ordinarily" as used in connection with the deduction of employees' motor vehicle expenses under paragraph 8(1)(h.1) of the Act. As you mentioned in your letter, paragraph 32(a) of IT-522R states that for the purposes of paragraph 8(1)(h) and (h.1) of the Act the word "ordinarily" means "customarily" or "habitually" rather than "continually". In other words, there should be some degree of regularity in the travelling that the employee is required to do.

One of the scenarios mentioned in your letter concerned a deduction for motor vehicle expenses incurred by an employee for attending an annual conference for employment-related purposes. This scenario appears to be somewhat similar to the situation considered by the Federal Court Trial Division in Imray et al v The Queen, 1998 DTC 6580. In Imray, the taxpayer had claimed deductions for travel expenses for attending an annual teachers' convention. The CRA had taken the position that the taxpayer was not "ordinarily" required to carry on the duties of his employment away from his employer's place of business or in different places because the required level of frequency of travel did not occur. The court found that even though the taxpayer only travelled once in the particular year for employment-related purposes, the travel expenses were incurred pursuant to legal and professional obligations under the Alberta School Act (1988) and the taxpayer's employment contract to participate in the conference for professional development purposes. Based on these facts, in the court's view, the taxpayer met the "ordinarily" requirement and his expenses were deductible.

Accordingly, where an employee in circumstances comparable to those in Imray, is required by his or her employer to attend an annual conference or convention for work-related purposes, reasonable motor vehicle or travel expenses will be deductible from employment income provided the other requirements under the Act are otherwise met.

Subsection 8(10) of the Act requires the employer to certify that the conditions for claiming travel expenses are met by the employee for the particular year in order for the expenses to be deductible from employment income. While the employer is required to certify that the requisite conditions of employment have been met, the employer is not required to actually determine whether the expenses are deductible under section 8 of the Act. Moreover, a completed and signed Form T2200 does not provide the employee with any assurance that such expenses will be deductible since the Act contains other criteria that the employee must also satisfy. However, we would expect an employer to issue a Form T2200 only where an employee has reasonable grounds to make such claims. Where the employer and employee have uncertainties that cannot be resolved by mutual agreement between both parties, the parties should contact their local TSO for further assistance.

We trust the above comments are of assistance.

Yours truly,

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