10 March 1986 Income Tax Severed Letter 7-0031 - [Deduction of Employer's Portion of CPP and UI by Employee]

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.

MAR 10 1986

HEAD OFFICE Specialty Rulings Directorate Farms, Personal & General Section N.R. Mitchell (613)957-2139

RE: Deduction of Employer's Portion of CPP and UI by Employee

This is in reply to your memorandum of November 14, 1985, concerning the above-named taxpayer, who is being audited for expenses claimed against commission income. We regret the unavoidable delay in responding.

Included in the taxpayer's claim is the employer's portion, of Canada Pension Plan contributions and Unemployment Insurance premiums. You have asked for our opinion as to whether or not the employee is entitled to deduct these expenses and you have made specific reference to paragraph 8(1)(f) of the Income Tax Act.

We must comment at the outset that we are assuming that XXXX was indeed an "employee" in the circumstances under consideration, rather than an independent contractor or self-employed individual. In other words, the limited deductions from income from an office or employment stipulated in section 8 of the Act were available to him - not the deductions provided for in section 18. We are also assuming that the CPP contributions and UI premiums in question were paid by the taxpayer in respect of his own coverage, and not that of an assistant or substitute as presided for in paragraph 8(1)(1.1) of the Act.

On this basis, it would appear that the obligation to pay the employer's portion of this pension and insurance coverage lies with XXXX employer. Indeed, section 9 of the Canada Pension Plan and subsection 62(2) of the Unemployment Insurance Act, 1971 require an employer to remit the respective specified amounts; each of these statutes sets out penalties which may be levied upon an employer who fails to do so.

Paragraphs 8(1)(k) and (l) of the Income Tax Act allow an employee to claim a deduction only with respect to "amounts payable by him as an employee" under the Unemployment Insurance Act, 1972 and the Canada Pension Plan, respectively.

The employer's share under these statutory schemes would not so qualify (as indicated earlier, paragraph 8(1)(1.1) is evidently not applicable to the situation at hand.) Furthermore, in view of the specific statutory provisions set out elsewhere in the Income Tax Act and in the other legislation referred to above, it is our view that the expenditures in question are not of a type which could be deductible under paragraph 8(1)(f) of the Act as amounts expended by the employee in the year for the purpose of earning income from employment.

We hope these comments will be of assistance.

for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch