22 March 2013 External T.I. 2012-0449511E5 - 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: Whether travel amounts paid to an employee employed at a XXXXXXXXXX location may be excluded from income under subsection 6(6) of the Act?

Position: Question of fact. In this case, no.

Reasons: An employee must satisfy all the requirements in subsection 6(6) of the Act, in order for reasonable amounts for board and lodging, and transportation provided by the employer for a period while the employee is at the work site not to be considered a taxable benefit for income tax purposes. Where the services to be performed by an employee at the employer's place of business will be required on an on-going basis, despite the fact that a particular employees' individual contract duties are for a short term basis, the employment duties would not be considered of a temporary nature for a particular employee.

XXXXXXXXXX 2012-044951
C. Underhill

March 22, 2013

Dear XXXXXXXXXX:

Re: Special Work Site

We are writing in response to your e-mail of May 24, 2012, concerning the taxation of certain payments made to employees working at underserviced areas. More specifically, you have enquired whether the special work site provisions under subsection 6(6) of the Income Tax Act (the "Act") would apply to the travel amounts paid to certain employees employed at a work site location.

In the situation you described, the employer has several work sites ("XXXXXXXXXX") located in Canada. You have indicated that the employer is having difficulty staffing some of the XXXXXXXXXX. In order to attract employees, the employer has agreed to pay the following travel supports: time spent travelling to the work site; reimbursement of meals and accommodations based on certain guidelines. An employee is entitled to transportation payments where the distance between the employee's principal place of residence and the XXXXXXXXXX is at least 90 kilometers. An employee is entitled to board and lodging payments where the employee works at an under staffed XXXXXXXXXX for two or more consecutive days. Employees employed at an under serviced XXXXXXXXXX will only perform services at this location.

Generally, the value of employer-provided board and lodging or transportation to and from a particular work location is included in an employee's income for income tax purposes pursuant to subsection 6(1) of the Act. However, subsection 6(6) of the Act provides an exception in limited circumstances for employment at a special work site or a remote work location.

Subparagraph 6(6)(a)(i) of the Act provides for an exclusion from an employee's income, for the value of employment benefits received or enjoyed, or a reasonable allowance in respect of, expenses incurred by the employee for board and lodging at a special work site. 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 are explained in paragraph 4 of Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations. It is important to note that for the special work site benefit exclusion to apply, all of the following requirements must be met:

1. The duties of the office or employment performed by the individual at the work location must be of a "temporary nature",

2. Throughout the period that the individual performed the duties of the office or employment at the work location, the individual must maintain at another location a self-contained domestic establishment as his or her principal place of residence, which was available for the individual's occupancy and not rented by the individual to any other person,

3. The distance between the individual's principal place of residence and the work location must be such that the individual cannot reasonably be expected to commute daily, and

4. The period the individual is required to be away from the principal place of residence at the work location because of the duties of the office or employment must be at least 36 hours.

The term "temporary" is not defined in the Act. Paragraphs 5 and 6 of IT-91R4 provide comments on whether employment duties at a special work site will be considered temporary. As noted in paragraph 5, the phrase "duties performed by the taxpayer were of a temporary nature" refers to the duration of the duties performed by the individual employee, not the expected duration of the project as a whole. Paragraph 6 clarifies that, where the duties are expected to provide the individual with continuous employment beyond two years, as determined at the outset, those duties are generally not considered to be of a temporary nature. The determination of the expected duration of employment must be made on the basis of the facts known at its commencement and consideration should be given to the factors noted in paragraph 6 of IT-91R4.

It is the view of the Canada Revenue Agency (CRA) that where the duties to be performed by an employee at the employer's place of business will be required on a continuous basis, despite the fact that a particular employee's individual contract/duties are for a short term, the duties would not be considered to be of a temporary nature.

The application of subsection 6(6) of the Act is a question of fact that can only be determined on a case-by-case basis. All of the conditions of subsection 6(6) of the Act must be met in order to qualify as a special work site for each employee. Since the duties do not appear to be of a temporary nature, we are of the view that a XXXXXXXXXX location would not meet the requirements in subparagraph 6(6)(a)(i) of the Act for a particular employee.

Generally, a reimbursement or a reasonable allowance provided to an employee for travelling expenses incurred in the performance of his/her duties of employment are excluded from the employee's income. However, travel between an employee's residence and the employee's regular place of employment, irrespective of the distance, is considered to be personal travel and any reimbursement or allowance received would be taxable. For further information, please refer to CRA Guide T4130, Employer's Guide - Taxable Benefits and Allowances.

We trust these comments will be of assistance.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch