13 May 2015 External T.I. 2014-0563801E5 - Transportation allowance - 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: Whether a transportation allowance is excluded from an employee's employment income under the Act.

Position: It is a question of fact, most likely yes.

Reasons: See response.

XXXXXXXXXX
2014-056380
C. Underhill

May 13, 2015

Dear XXXXXXXXXX:

Re: Transportation allowance – remote work location

We are writing in response to your letter received on December 30, 2014, and our telephone conversation (Underhill / XXXXXXXXXX) on March 4, 2015, wherein you asked whether a transportation allowance is excluded from an employee's employment income by subparagraph 6(6)(b)(ii) of the Income Tax Act (Act).

In the situation described, XXXXXXXXXX(Company A) provides truck and mechanic services to XXXXXXXXXX (Company B). The employees of Company A (Employees) provide these services at Company B's remote work location in Canada. Company B provides board and lodging for Employees at the remote work location. Both Company A and B have determined that subsection 6(6) of the Act excludes the value of the board and lodging from the income of Employees. Company A pays a transportation allowance to Employees each time the employees travel between their home and the remote work location.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

Generally, the value of employer-provided, or a reasonable allowance for, transportation between an employee's home and a particular work location is included in an employee's income under subsection 6(1) of the Act. However, paragraph 6(6)(b) of the Act excludes from an employee's income certain transportation benefits and allowances related to a special work site or a remote work location if "the taxpayer received board and lodging, or a reasonable allowance in respect of board and lodging, from the taxpayer's employer."

Based on the principles of statutory interpretation, we have interpreted the phrase "received... from the taxpayer's employer" in paragraph 6(6)(b) of the Act as received... in respect of the taxpayer's employment. This means that a transportation benefit or allowance may be excluded by paragraph 6(6)(b) of the Act where the taxpayer also received a board or lodging benefit or allowance in respect of the taxpayer's employment. It is a question of fact whether a benefit or allowance is received in respect of employment. However, the courts have given the phrase "in respect of" the widest meaning possible and there only needs to be a small connection between the benefit or allowance and the taxpayer's employment.

The application of the rules in subsection 6(6) of the Act can only be determined on a case-by-case basis. That being said, it is our view that subparagraph 6(6)(b)(ii) of the Act likely applies to exclude the transportation allowance (assuming that it is reasonable) from employment income. Our view assumes that the conditions in subsection 6(6) of the Act are otherwise met and the Employees received board and lodging in respect of their employment.

For more information about remote work locations, see Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, or chapter 3 of Guide T4130, Employers' Guide – Taxable Benefits and Allowances.

We trust these comments will be of assistance.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate