28 May 2012 Internal T.I. 2011-0421441I7 - Travel btwn temp residence and 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: Is a transportation allowance paid to an employee working at a special work site, for the purpose of travelling between the work site and the employee’s temporary accommodations, included into income as a taxable benefit under the Act?

Position: Question of fact to be determined on a case-by-case basis; however, travel between an employee’s residence and the place where the employee regularly reports for work is generally considered to be personal travel and not employment-related travel.

Reasons: If an employee works at a special worksite for an extended period of time, it is our view that the special worksite will most likely be that employee’s regular place of employment.

                                          May 28, 2012

      Ita Mackey                                      Tom Posadovsky, CMA
Trust Exam & Employer Compliance Audit            IT Rulings Directorate
Newfoundland and Labrador Tax Services Office   Reorganizations Division

      Sir Humphrey Gilbert Building                           

      165 Duckworth Street, PO Box 12075              (613) 952-8283

      St. John’s NL  A1B 4R5                          

2011-042144

Travel between a temporary residence and a special work site

We are writing in response to Tony Horwood’s email dated September 19, 2011 concerning travel between an employee’s temporary residence and a special work site. We apologize for the delay in responding.

Unless otherwise stated, all references herein to a part, section, subsection, paragraph or subparagraph is a reference to the relevant provision of the Income Tax Act, R.S.C. 1985 (5th Suppl.), c.1, (the “Act”) as amended.

Background

XXXXXXXXXX has asked you to consider a situation in which an employer assigns an employee to a work location other than his or her home work location for an extended period of time. If certain conditions are met, the employer will pay the employee a non-taxable housing allowance. XXXXXXXXXX believes that if an employee meets the exemption for the housing allowance at a special work site, then any allowance paid for transportation between the employee’s temporary residence and the special work site should also be excluded from the employee’s income. XXXXXXXXXX contends that this treatment is logical, given the employee’s additional transportation costs incurred while the employee is at the temporary work site, and in line with Canada Revenue Agency (“CRA”) publications. You are requesting our views on whether such an allowance should be included in the recipient’s income from employment pursuant to section 6 of the Act.

Our Comments

Paragraph 6(1)(a) of the Act generally requires that the value of any benefit received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of, an office or employment, be included in the taxpayer’s income from employment. Paragraph 6(1)(b) provides that all amounts received by the taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose are required to be included in computing the income of the taxpayer except where specifically exempted in that paragraph. Travel between an employee’s place of residence and the place where he or she works is generally considered to be personal travel; however, subsection 6(6) of the Act provides some exceptions related to employment at a special work site or a remote work location.

Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, outlines the conditions which must be met for a particular work location to be considered as a special work site or a remote work location in respect of a particular employee. Where the conditions are met, paragraph 6(6)(a) of the Act excludes from the income of an employee reasonable amounts received for board and lodging at a special work site or remote location in connection with temporary employment away from the employee’s ordinary place of residence. Paragraph 6(6)(b) of the Act provides that an employee who, for a particular period of time, receives reasonable amounts in respect of board and lodging at a special work site, will not be required to include in income a reasonable amount received in respect of transportation between the employee’s principal place of residence (a self-contained domestic establishment that is the employee’s normal place of residence) and the special work site during that period. However, as stated in paragraph 10 of IT-91R4, transportation assistance relating to travel between the special work site and a location other than the employee’s principal place of residence, such as the temporary place of residence, is not excluded from income under paragraph 6(6)(b).

Paragraph 6(1)(b) of the Act requires that any amount received by a taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose is required to be included in computing the income of the taxpayer, except where specifically exempted in that paragraph. For instance, subparagraph 6(1)(b)(vii) provides that under certain circumstances, a reasonable allowance for travel expenses is not a taxable benefit. Similarly, subparagraph 6(1)(b)(vii.1) exempts a reasonable allowance for the use of a motor vehicle in the performance of the duties of an office or employment. However, as explained in paragraph 49 of IT-522R, Vehicle, Travel and Sales Expenses of Employees, travelling to the place where a person reports for work does not generally qualify as “travelling in the performance of the duties of the office or employment”.

In conclusion, travel between an employee’s residence and the employee’s regular place of employment is generally considered to be personal travel and not employment-related travel. As explained on page 29 of the T4130 Employers’ Guide: Taxable Benefits and Allowances, “Any location to or from which the employee regularly reports for work or performs the duties of employment is generally considered a regular place of employment”. Whether or not a special worksite in a specific situation is where a particular employee regularly reports for work is a question of fact; however, if an employee works at a special worksite for an extended period of time, as is indicated in XXXXXXXXXX’s submission, it is our view that the special worksite will most likely be the employee’s regular place of employment. Accordingly, any allowance paid by the employer for the use of the employee’s vehicle for transportation between his or her temporary place of residence and the special worksite would be a taxable benefit under paragraph 6(1)(b) of the Act.

Access to information

Unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CRA’s electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be directed to Mrs. Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.

We trust that our comments will be of assistance to you.

Yours truly,

Mark Symes
Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch