1 June 1989 Internal T.I. 73779 F - Transportation to the Job - Special and Remote Work Sites

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.

SUBJECT: Transportation to the Job - Special and Remote Work Sites

This is in reply to your memorandum of March 22, 1989 requesting our comments on the distinction between transportation assistance to and from a special or remote work site and commuting assistance to and from a regular job site.  Reference is also made to our subsequent telephone conversation (Wilson/Ozols).

As you have noted, it is well-accepted in law that the cost incurred in commuting to and from one's place of work is a personal expense.  The courts, when considering the deductibility of travelling expenses under section 8 of the Income Tax Act (the "Act"), have stated that one of the criteria is "where does the employee report for work". Where and employee is hired at one location (say, Ottawa) and reports to another location (Renfrew), the employee is considered to be employed in Renfrew and the cost for commuting to and from Ottawa is not a deductible expense. Any assistance provided by the employer in respect of the commuting would be a taxable benefit under either paragraph 6(1)(a) or 6(1)(b) of the Act.

However, as you have also noted, subsection 6(6) of the Act provides that where a work location qualifies as a special or remote work site, transportation assistance between the work location and the employee's principal place of residence is excluded as a taxable benefit provided all of the criteria set out in that subsection are met.

Your question is, how do you make the distinction between transportation assistance to and from a special or remote work site and commuting assistance to and from a regular job site.

Our opinion is that the question can be answered by using the criteria found in subsection 6(6) of the Act and also Interpretation Bulletin IT-91R3 and the Special Release. In the case of a special work site these can be summarized as follows:

1.     The duties performed by the employee must be of a temporary nature.  Generally, temporary means for a period not exceeding two years;

2.     The employee must maintain at another location a self- contained domestic establishment as his principal place of residence

a)     that was available for his occupancy and not rented out, and

b)     to which, because of distance, he could not reasonably be expected to return daily.  Generally, a distance in excess of 80 kilometres would be unreasonable;

3.     The employee must have been required to be away from his principal place of residence for not less than 36 hours.  This time period may include time spent travelling between his principal place of residence and the special work site;

4.     The transportation assistance is not exempt to the extent it applies to transportation between the employee's temporary residence and the special work site; and

5.     The transportation assistance must be in respect of a period during which the employee also received board and lodging assistance. 

     For a remote work location, the criteria are

1.     The location must be such that, because of its remoteness from an established community, the employee could not reasonably be expected to establish and maintain a self-contained domestic establishment;

2.     As 3, 4 and 5 above.

We believe that the above criteria mark the boundary line between transportation assistance being a taxable benefit and being tax exempt.  When an employee is commuting daily, any transportation assistance would be a taxable benefit because the employee would not have been away from his principal residence for not less than 36 hours.  In addition, an employee who was commuting daily would probably not be in receipt of a board and lodging allowance and therefore could not claim an exemption for the transportation assistance.  Even if he did receive a board and lodging allowance, he would still run afoul of the 36 hour rule.  However, an employee commuting on a weekly basis, for example, who meets all of the other criteria, could receive a tax exempt transportation allowance.

We do not believe the question, "where does the employee report for work", is relevant when determining the application of subsection 6(6) of the Act.  The question arises when determining the deductions available for travelling expenses under subsection 8(1) of the Act because travelling to and from the employee's residence and the place he reports for work is a personal expense. However, under the criteria in subsection 6(6) of the Act, the question need not arise. 

To use your example of an employee being hired in Ottawa and reporting for work in Renfrew, commuting expenses would not be deductible under subsection 8(1) of the Act and any allowance for that purpose would be taxable under paragraph 6(1)(b) of the Act.  If, however, the circumstances were such that Ottawa, and not Renfrew, was where the employee reported for work (for example, if the employee physically had to report to the employer's establishment in Ottawa for legitimate reasons before proceeding to Renfrew before returning home) then he could deduct his travelling expenses between Renfrew and his employer's Ottawa establishment, provided he other wise fit into one of the provisions in subsection 8(1) of the Act.  Likewise, a mileage allowance received from the employer for travelling between Renfrew and the employer's Ottawa establishment would be tax exempt under paragraph 6(1)(b)(vii.1).  However, in either event, Renfrew could still qualify as a special work site under subsection 6(6) if the criteria noted earlier could be met.

In your memorandum, you discussed the situation where employees working on large hydro projects are hired through a union hall for the duration of the project and report to work at the project site.  By the "reporting for work" test, the employees' place of work is the job site, and in your opinion transportation to and from the site as well as the board and lodging at the site should be taxable; however, they are accorded special work site treatment.

In our opinion, it is a question of fact to be decided in each case whether the special or remote work site rules apply.  In one case where we asked for an opinion, an employee of who resided in Toronto and normally worked 24(1) downtown Toronto was required to work on a temporary basis 24(1) 85 kilometres away.  He commuted daily and received an allowance for this purpose. It was our opinion that subsection 6(6) was not available since the employee could reasonably be expected to return daily to his principal place of residence in Toronto and his duties did not require him to be at the work site for more that 36 hours.  The allowance was therefore taxable.

In our telephone conversation the issue arose of the interaction between subparagraphs 6(1)(b)(vii) and (vii.1) and subsections 6(6) and 8(1), particularly paragraph 8(1)(h).  Such a situation might arise where employees who are performing their duties at various locations outside the municipality of their employer's place of business (but to which they submit their reports) receive a per diem allowance which is insufficient to cover their actual expenses.  The argument could be made that the per diem allowance received by the employee may qualify for exclusion from income under the provisions of either subparagraphs 6(1)(b)(vii) or (vii.1) and 6(6)(a)(i) of the Act.  The preamble to subsection 6(6) of the Act (which reads "notwithstanding subsection (1)") may render subparagraphs 6(1)(b)(vii) or (vii.1) of the Act inoperable inasmuch as it is the more specific of these provisions.  The amount of the allowance would thereby not be considered to have been excluded from income under subparagraphs 6(1)(b)(vii) or (vii.1) of the Act for the purposes of subparagraph 8(1)(h)(iii) of the Act, with the result that an employee would be entitled to a full claim for expenses under paragraph 8(1)(h) of the Act notwithstanding that the related allowance has been excluded from income under subsection 6(6) of the Act.

The recent case of Winter v. M.N.R. 88 DTC 1143 (T.C.C.) suggests such an argument might be sustainable to a degree, although the issue was not addressed directly.  The taxpayer was employed in Calgary but for 5 months in 1984 worked at a job site in Medicine Hat, some 300 kilometres away. He returned to Calgary on weekends, either to visit his family or to attend progress meetings and pick up tools.  He retrieved an allowance for room and board in Medicine Hat which was excluded from income under subsection 6(6) of the Act.  He claimed expenses under paragraph 8(1)(h) of the Act for travelling and living expenses and rent incurred in excess of his allowance.  The Court found that the taxpayer qualified for a deduction for travelling expenses.  The Court did not consider, in the circumstances, that Medicine Hat was the employer's place of business. However, his claim was based entirely on his own unsupported ex post facto formula for determining the cost of travel to and from Calgary.  The deduction was disallowed because it could not be determined what proportion of the travel was required for his employment.  With respect to the living expenses and rent, these were not incurred while travelling and so were not deductible.

It thus appears possible that expenses may be deducted under paragraph 8(1)(h) of the Act even where a benefit has been excluded from income under subsection 6(6) of the Act.

However, it must be kept in mind that in the Winter case, the excluded benefit was in respect of expenses which were not deductible at all (i.e. living expenses and rent in Medicine Hat).  It is not certain what the court's decision would have been if an allowance had been received for a portion of the expenses incurred in travelling to and from Calgary.  Would it have been excluded under subparagraph 6(1)(b)(vii.1) or subsection 6(6) of the Act?  If excluded under subsection 6(6) and not subparagraph 6(1)(b)(vii.1) of the Act, would the deduction under paragraph 8(1)(h) of the Act be available?

In our view, it is unlikely that there would be many situations where an employee would have a choice as to whether an allowance was excluded under subparagraphs 6(1)(b)(vii) or (vii.1) of the Act, or in the alternative, subsection 6(6).  It is a question of fact in each case whether or not travelling from an employee's personal residence to a special or remote work site was done "in the performance of the duties of his office or employment" as required by subparagraphs 6(1)(b)(vii) and (vii.1) and paragraph 8(1)(h) of the Act.  In the Winter case it was; however, in other similar cases (such as Andrews v. M.N.R. 87 DTC 410 (T.C.C.)), it was a personal expense.  It is also the Department's position, as set out in subparagraph 25(a) of Interpretation Bulletin IT-272R, that in circumstances where an employee does not receive a travelling allowance that is excluded from his income by subparagraphs 6(1)(b)(vii) or (vii.1) of the Act and incurs supplementary cost in the form of a second type of travelling expense, a claim for that second expense paid by the employee may be allowed.

We trust the above is of assistance to you.

B.W. DathDirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch