6 January 2010 External T.I. 2009-0344981E5 - Employee Professional Development

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 contributions made by an employer towards the cost of a one day in-service program that is intended to improve a participating employee's computer literacy skills will constitute a taxable employment benefit where the participants are allowed to keep a laptop computer at the end of the training session.

Position: Question of fact. However, the CRA has accepted that employer-paid training costs will not result in a taxable employment benefit to an employee where the primary beneficiary of the training is the employer.

Reasons: Don't have all the facts.

XXXXXXXXXX 								2009-034498
									Michael Cooke, C.A.
January 6, 2010

Dear XXXXXXXXXX :

Re: In-Service Training Program

This is in response to your letter dated October 21, 2009, wherein you requested our views on the taxability under paragraph 6(1)(a) of the Income Tax Act (the "Act") of amounts paid by the XXXXXXXXXX (the "Employer") to certain XXXXXXXXXX ("Employees") who attend a one-day introductory computer laptop in-service program (the "Program"). We also acknowledge the additional information you provided to us in your facsimile dated December 3, 2009.

Briefly, we understand that the Employees are members of the XXXXXXXXXX (the "Union"). Employees who are eligible to participate in this Program will be provided with a laptop computer complete with a warranty and certain related software. The purpose of Program is to develop the participating Employees' computer literacy skills by providing introductory level training on how to use a variety of computer programs including, Power Point, Word, Excel, XXXXXXXXXX . Two separate sessions of the Program will be held in early 2010 at the Union's office. Since space is limited, only XXXXXXXXXX Employees will be able to participate in the Program in 2010. XXXXXXXXXX .

The cost of the Program will be shared as follows: $XXXXXXXXXX from the Employer; $XXXXXXXXXX from XXXXXXXXXX ; $XXXXXXXXXX from the Union; and $XXXXXXXXXX from the participating Employee. The Employees' participation in the Program is voluntary and upon completion of the Program the Employee will own the laptop computer. It is intended that the Program will be offered in subsequent years.

Our Comments

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. However we are prepared to offer the following general comments.

Paragraph 6(1)(a) of the Act includes in an employee's income the value of any benefit received or enjoyed in respect of his or her employment. It is the CRA's general view that an employee will be considered to have received taxable employment benefit when the employee is reimbursed, in whole or in part, for the cost of an asset which the employee will own, notwithstanding that the particular asset may otherwise be used for employment-related purposes. For example, paragraph 23 of Interpretation Bulletin IT-470R, Employees' Fringe Benefits (Consolidated) provides that where an employer makes payments to its employees to offset the cost of tools that the employees are required to have in order to perform their work, the amount of the payment must be included in the employees' incomes.

However, notwithstanding the above, the CRA has considered several programs whereby employers have provided their employees with personal computers, printers, software, and/or internet access for the purpose of developing their employees' computer and internet skills. After examining all of the facts and documentation, in some of these situations, the CRA accepted that the particular program did not result in a taxable employment benefit where the primary beneficiary of the training was the employer. Generally speaking, where the CRA was satisfied that there was no taxable benefit, the programs generally had the following common characteristics:

• The employers thought that it was critical for their future success that all employees become computer literate as soon as possible;
• The employers thought that the most efficient and effective way to develop their employees' computer and internet skills was to provide them with computers for use in their homes;
• The programs were available to all employees;
• The employers leased or purchased the computers, and had them delivered directly to the employees;
• The employees could not transfer or sell the computers for a set period of time;
• Employees who chose not to participate in the programs were not entitled to any compensation in lieu of their participation; and
• The programs were initiated by the employers and were not part of any collective bargaining process.

General guidelines on the taxation of employer paid training costs can also be found in Income Tax Technical News No. 13 ("ITTN #13").

In order for the Program to fall within the aforementioned guidelines, the training must be sufficiently linked to an employment-related need or requirement such that it would be reasonable to consider that the training is primarily for the benefit of the Employer and not the Employee. If it can be established that the training is primarily for the benefit of the Employer then the Program would not result in a taxable benefit to the participating Employee.

We trust that our comments will be of assistance.

Yours truly,

Renée Shields
Manager
Business and Personal Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch