29 June 1995 External T.I. 9516715 - EMPLOYMENT EXPENSES

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

whether work space in home amount may be claimed by certain employees of the XXXXXXXXXX

Position TAKEN:

Question of fact but it appears from information provided that no work space in home deduction would be permitted

Reasons FOR POSITION TAKEN:

Employees do not principally perform the duties at home nor
do they meet the conditions of 8(13)(a)(ii)

		951671
XXXXXXXXXX	D. Zion

Attention: XXXXXXXXXX

June 29, 1995

Dear Sirs:

Re: Employment Expenses

We are writing in response to your correspondence of June 22, 1995 and our subsequent telephone conversation of June 28, 1995 (XXXXXXXXXX/Zion) in which you request confirmation of your interpretation of the Income Tax Act provisions relating to work space in home expenses.

You have advised us that many of your Physiotherapists and Occupational Therapists work from their homes for up to an hour and a half each day preparing files for visits to clients' homes and scheduling appointments. Limited and shared office space is available to them for these purposes but, out of convenience, most of this work is done from the home. It is our understanding that the balance of these employees' work day is spent out in the community on home visits. You are of the view that comments contained in paragraph 1 of Interpretation Bulletin IT-352R, Employee's Expenses, Including Work Space in Home Expenses provides sufficient authorization to entitle these employees to claim expenses for an office in the home. Consequently, the employer would provide a signed certification (form T2200) to the employee, which is required by virtue of subsection 8(10) of the Income Tax Act (the Act) to accompany the claim for expenses form T777 (Statement of Employment Expenses for Reimbursement).

As we advised you in our conversation, form T2200 is a prescribed multi-use form, upon which the certification by the employer is required by subsection 8(10) in order to support any claim for a deduction under paragraphs 8(1)(f), (h) or (h.1) or subparagraphs 8(1)(i)(ii) or (iii) of the Act. A claim for office space in the home is made under subparagraphs 8(1)(i)(ii) or (iii) of the Act which restricts claims to those which the employee is required by the contract of employment to supply and pay for.

We confirm your understanding of the comment in paragraph 1 of IT-352R2 that this requirement may be met if the employee can establish that it was "tacitly understood by both parties (the taxpayer and the employer) that such payment was to be made by the taxpayer and was, in fact, necessary under the circumstances to fulfil the duties of employment. Although ordinarily this requirement necessitates that there be an express requirement within the terms of a written contract of employment, it is the Department's general position that this requirement may also be considered to have been satisfied where it is tacitly understood by the employer and the employee that the supplies be provided by the employee. This will be a question of fact and can only be determined through a review of the circumstances present in each case. In order to determine if an expense incurred by an employee was actually an implied requirement of the contract of employment, the Courts have reviewed whether or not the failure to meet the requirement could result in the cessation of employment, poor performance evaluation or other disciplinary action on the part of the employer.

Item # 10(a) of form T2200 simply asks the employer whether the employee was required under a contract of employment to use a portion of his or her home. If there is, in fact, a contract or agreement (express or implied) between the employer and the employee which sets out the use of the home work space as one of the conditions of employment then the employer may so certify. Although subsection 8(13) of the Act contains further restrictive conditions involving the extent to which the work space in the home is used in the performance of employment duties, subsection 8(10), in our view, does not require these to be considered in assessing the employer's obligations in providing the certification.

Even though a form T2200 certification is provided to an employee, based on the principles discussed above, there remains the question of whether a particular employee is precluded from claiming a deduction for the factual use of the work space in the home. Subsection 8(13) of the Act prohibits the deductibility of amounts for a work space in the home unless the individual either principally performs the duties of the office or employment in that work space, or, the work space is "used exclusively ...for the purpose of earning income from the office or employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties ...". The term "principally", for the purposes of the Act, is taken to mean in excess of fifty percent while an "office" is defined in subsection 248(1) of the Act to mean "the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration ...". Whether that condition is met by any particular employee involves a factual determination.

Consequently, it is our view that the employees in question, in the circumstances previously described, would not be entitled to claim a work space in the home amount as a deduction from employment income. A deduction would be denied because these employees do not "principally" perform the duties of the office or employment from a work space or office in the home nor does it appear that the staff use the work space in the home exclusively for earning income from employment and on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch