30 October 1989 Administrative Letter 58426 F - Wharfingers and Harbourmasters

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.

October 30, 1989

Dear Sirs:

Re:  Wharfingers and Harbourmasters

We are replying to your letter of July 20, 1989, concerning the expenses incurred by wharfingers and harbourmasters while collecting revenue for the Government of Canada.

You state that wharfingers and harbourmasters are paid on a commission basis from which income tax, unemployment insurance premiums and Canada Pension Plan contributions are withheld.  You furthers state that Transport Canada does not consider such individuals to be employees of Transport Canada.

You have cited the example of a particular wharfinger who maintains an office in his home and travels between his home and the wharf frequently, thereby incurring automobile expenses. You have asked whether this wharfinger in particular, can claim expenses against his commission income and whether wharfingers and harbourmasters in general, are likewise entitled to deduct expenses.

An individual's entitlement to a deduction for expenses depends in part on whether the individual is an employee or a self- employed agent and on the conditions of employment if applicable. It is a question of fact as to whether an individual is considered an employee or self-employed for the purpose of the Income Tax Act (the "Act").  However, the Department will normally consider an individual to be an employee if the income is considered employment income for the purposes of the Unemployment Insurance (1971) Act and the Canada Pension Plan. If you or the individual concerned has any doubt as to the status of employment you should contact a rulings officer in the Source Deductions Section of your local district taxation office.

If the individual is self-employed, reasonable expenses may be claimed in computing the profit from business.  The enclosed material, the Business and Professional Income Tax Guide, and Interpretation Bulletins IT-514 and IT-521 discuss business expenses, and automobile and work space in the home expenses in particular, in more detail.

However, an employee is only entitled to deduct expenses from his employment income if he meets the specific criteria outlined in the Act and described in the attached guide "Employment Expenses".  In our telephone conversation of September 1, 1989, (Michaelis/Humenuk) you indicated that the conditions of work might vary between wharfingers and harbourmasters (e.g. number of wharfs, existence of an office on the wharf) and that these conditions would be governed by a contract with the Harbour and Ports Manager.  Accordingly, if a wharfinger or harbourmaster is determined to be an employee for the purpose of the Income Tax Act, the entitlement to expenses will vary depending on specific duties and responsibilities set out in the contract of employment.

The attached Interpretation Bulletins IT-352R "Employees' Expenses Incurred in Performing Duties of Office or Employment" and IT-522 "Vehicle and Other Travelling Expenses-Employees" discuss the deductibility of two of the more commonly claimed expenses, office in home and automobile expenses, respectively. In both instances, the employee will only be entitled to deduct the expenses described in the bulletin to the extent that he is required by his contract of employment to pay those expenses in the performance of the duties of office or employment.  In this regard it should be noted that travel between the employer's place of business and the employee's home is personal and not deductible and that an employee is not considered to be required to maintain an office in the home if the employer provides office space elsewhere.

For further details concerning these or any other expenses deductible by an employee, please consult the bulletins or the local district office located at 19 Lisgar Street South, Sudbury, P3E 3L5.

We trust our comments will be of assistance to you.

Yours truly,

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch

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