17 July 2012 Internal T.I. 2011-0421921I7 - Special work site and remote work location

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: 1. Are the duties performed by project staff working at the employer’s various project work sites considered “'temporary” for purposes of subparagraph 6(6)(a)(i) of the Act? 2. Are employees working at a particular work site employed at a remote location for purposes of subparagraph 6(6)(a)(ii) of the Act?

Position: Unable to rule as such determinations are a question of fact. The matter was referred to the Trust Accounts Programs Division for their views.

Reasons: In any given situation, each particular location and each employee’s duties and personal circumstances need to be considered on a case-by-case basis in order to determine whether an exemption in subsection 6(6) of the Act has been met.

July 17, 2012

Policy & Legislative Research T. Posadovsky
Trust Accounts Programs Division
Taxpayer Services & Debt Management Branch
25 McArthur Road, Room 968 Place Vanier, Tower C
Ottawa ON K1A 0L5
2011-042192
Attn: Joshua Drake
Senior Programs Officer

XXXXXXXXXX
Special work site and remote work location

We are writing in respect of the above-noted taxpayer (the “Employer”) and its advance income tax ruling request concerning the application of subsection 6(6) of the Income Tax Act (the “Act”). As discussed, we are unable to provide the Employer with a ruling; however, we understand that the Trust Accounts Programs Division will provide the taxpayer with the Canada Revenue Agency’s response. We are therefore providing you with our views on the matter in order to assist in formulating your response.

Background

The facts are summarized as follows:

1. The taxpayer’s project is currently in its initial stages and presently employs approximately XXXXXXXXXX employees. Completion is projected to be sometime in XXXXXXXXXX.

2. XXXXXXXXXX

3. It is anticipated that staff will be paid amounts in respect of, or will be provided with, board and lodging, as they will be hired to work at sites which will likely be far away from their ordinary and principal place of residence. Staff will also be reimbursed costs to return to their principal place of residence from time to time. Staff may also receive reimbursement for travel expenses to and from the work site at the commencement and termination of their assignment.

4. The Employer anticipates that project staff will be located at several work sites within Canada XXXXXXXXXX .

5. Project staff will typically be hired for a particular phase of the project. However, depending on their area of expertise, some staff may be hired for more than one phase.

6. No express or implied guarantee is provided with respect to the duration of a particular phase of the project; the eventual duration is determined by the needs of the project.

7. Several phases of the project will be constructed at XXXXXXXXXX While each construction phase shares a common goal, each requires separate and unique expertise to ensure completion.

8. At any given time, between XXXXXXXXXX project staff will be working at the XXXXXXXXXX site. The Employer expects the majority of the staff will be accommodated on-site, while certain employees will choose to live in various communities in and around the XXXXXXXXXX site, in self-contained domestic establishments.

9. It is anticipated that there will be other work sites and offices within Canada and/or abroad. Similarly, employees will be hired with the expectation that they will work at a particular location for the duration of a particular phase of the project. These locations will be known once the project progresses and additional contracts are awarded.

10. At the completion of a particular phase(s) for which employees are hired, staff will return to their ordinary and principal place of residence or move on to another project. Given the highly specialized nature of project staff, and the limited size of communities around XXXXXXXXXX, there would likely be no further employment opportunities available for those individuals at these locations.

Issues

The Employer is requesting confirmation that duties performed by project staff working at XXXXXXXXXX project work site(s) are considered “temporary” for purposes of subparagraph 6(6)(a)(i) of the Act. With such confirmation, the Employer and its contractors will regard such sites as special work sites in respect of such staff to the extent that such staff maintain a self-contained domestic establishment as their principal place of residence, meeting the tests in 6(6)(a)(i)(A) and (B) of the Act.

The Employer presumes that the CRA will consider project staff living in the dormitories at XXXXXXXXXX to be working at a remote location for purposes of subparagraph 6(6)(a)(ii) of the Act. However, confirmation is also sought with respect to project staff working at XXXXXXXXXX who have established and maintained self-contained domestic establishments in communities near the XXXXXXXXXX site.

Unable to Rule

We are unable to provide the taxpayer with an advance income tax ruling. This is because whether a particular employee or location meets the conditions outlined in subsection 6(6) of the Act is a question of fact that must be determined on a case-by-case basis. Paragraphs 8 and 15(j) of Information Circular IC 70-6R5, Advance Income Tax Rulings, explain that the CRA cannot provide an advance income tax ruling when a matter on which a determination is requested is primarily one of fact and the circumstances are such that all the pertinent facts cannot be established at the time of the request. We are, however, prepared to offer the following comments.

Our comments

The value of employer-provided board and lodging and employer-paid transportation between home and a regular place of employment is generally considered a taxable benefit included in an employee’s income for income tax purposes pursuant to subsection 6(1) of the Act. However, the Act provides an exception from the inclusion of such taxable benefits in respect of employment at a special work site or a remote work location.

Special work site

Subsection 6(6) of the Act provides that an employee may exclude from income reasonable amounts received for transportation to and from, and board and lodging at, a special work site. As explained in paragraph 4 of Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, all of the requirements in paragraph 6(6)(a) of the Act must be met in order for these exclusions to apply.

Paragraph 6 of IT-91R4 explains that the CRA will generally accept that an employee’s duties are of a temporary nature at a particular work site if it can reasonably be expected that the employee is not continuously employed at that location beyond a two year period; however it is also recognized in IT-91R4 that there may be situations where the continuous two year employment period may not be applicable. In any given situation, each employee’s personal circumstances would need to be considered on a case-by-case basis at the commencement of the particular employment in order to determine whether all the requirements of the special work site exemption in subsection 6(6) of the Act have been met.

It is our view that provided a particular employee in the situations described otherwise meets the conditions noted above, the fact that the employee is required to carry on his or her duties at one of the Employer’s work sites in excess of the two year guideline mentioned in IT-91R4 would not automatically preclude the application of subsection 6(6) of the Act. Other factors that should be taken into account include, but are not limited to: the nature of the duties to be performed by the employee; the overall time estimated for the particular project; and the agreed period of time for which the employee was engaged to perform such duties under the employment contract or other terms of the engagement.

Remote work location

Subsection 6(6) of the Act also provides that an employee may exclude from income reasonable amounts received for transportation to and from, and board and lodging for a period, at a remote work location. For these exclusions to apply, the following requirements must be met:

1. the employee must have worked at a location, being a location at which, by virtue of its remoteness from any established community, the employee could not reasonably be expected to have established and maintained an SCDE; and

2. the period while the employee was required by the employee’s duties to be at the remote work location was at least 36 hours.

Paragraph 14 of IT-91R4 explains that for a particular work location to be considered to be remote from an established community, the following factors are considered:

• the availability of transportation;
• the distance from an established community; and
• the time required to travel that distance.

The CRA generally accepts that a particular work location will be considered to be remote if the nearest established community with a population of 1,000 or more is no closer than 80 kilometres by the most direct route normally travelled in the particular circumstances. However, where the particular work location is less than 80 kilometres from an established community it may nonetheless be considered to be remote depending on the relevant facts and circumstances. For instance, the first test considers whether an employee could reasonably be expected to establish and maintain an SCDE at the work location. This may be the case where there is a significant lack of housing available for employees in nearby established communities such that an employee could not reasonably be expected to establish and maintain a SCDE. Such a determination is a question of fact, but as explained in paragraph 13 of IT-91R4, the remote work location exclusion will not apply in the following circumstances:

• the employer provides a self-contained domestic establishment to the employee at the work location;
• the employee is drawn from the local community itself where the employee’s housing has already been established;
• the employee opts to buy property and builds his or her own self-contained domestic establishment; or
• the employee rents a self-contained domestic establishment at the work location.

A SCDE is defined in the Act as a dwelling-house, apartment or other similar place of residence where a person generally sleeps and eats. A residence is considered to be an SCDE if it is a living unit with restricted access that contains a kitchen, bathroom and sleeping facilities. A room in a hotel, dormitory, boarding house or bunkhouse would not ordinarily meet the definition.

In reference to the case at hand, an employee who has established and maintained a SCDE in one of the surrounding communities (whether employer-provided or not) would not qualify for the exclusion under subsection 6(6) of the Act. The employees may, however, meet the conditions of the special work site exclusion under subparagraph 6(6)(a)(i) of the Act. Further, based on the situation described, it is not clear whether the conditions of 6(6) will have been met such that an employee required to reside in the camp at the XXXXXXXXXX work site would be considered to work at a remote location for purposes of subparagraph 6(6)(a)(ii) of the Act. Whether a particular work location meets the conditions of subsection 6(6) of the Act is a question of fact that must be determined on an employee-by-employee basis.

We trust our comments will be of assistance.

Yours truly,

Nerill Thomas-Wilkinson
Manager
for Director
Reorganizations Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch