12 September 1997 Internal T.I. 9715497 - SPECIAL WORK SITE\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.

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 the allowance received by the individual constitutes a reasonable allowance excluded from the individual's income by virtue of subsection 6(6) of the Act.

Position:

Unable to determine; general comments.

Reasons:

Insufficient facts given to determine whether special work site or remote work location or whether the allowance can be excluded under paragraph 6(1)(b) of the Act.

			September 12, 1997

	WINNIPEG TAX CENTRE	HEADQUARTERS
	Individual and Estates         Roxane Brazeau-LeBlond, CA
  Returns Division				(613) 957-8953

	Attention:  D. Anderson
			971549

Employment at special or remote work site

This is in reply to your memorandum dated June 6, 1997 requesting our views as to whether the allowance received by XXXXXXXXXX constitutes a reasonable allowance that should be excluded from his income by virtue of subsection 6(6) of the Income Tax Act (the "Act").

The individual received subsistence payments totalling $XXXXXXXXXX from his employer by virtue of a collective agreement that provides an allowance of $XXXXXXXXXX per day for anyone living at least 40 kilometres away from XXXXXXXXXX.

XXXXXXXXXX

The individual's T-4 indicates that box 14, "Employment Income" includes taxable subsistence payments of $XXXXXXXXXX. The individual believes that these payments should not have been included in his income by reason of subparagraph 6(6)(b)(i) of the Act.

Our comments

The determination of whether a particular allowance may be excluded from income necessitates an appreciation of all of the particular facts of a given situation. Unfortunately, we have not been provided with sufficient information on the nature of the allowance the individual received or the conditions of the individual's employment to determine whether the individual received an allowance in respect of board and lodging or for transportation at a special work site or remote work location that could be excluded from the individual's income pursuant to subsection 6(6) of the Act or otherwise. However, we can offer you the following comments which will assist you in making this determination.

Generally, an allowance received by an individual in the course of an office or employment is subject to tax unless it falls within the exceptions listed in subsection 6(6), subparagraphs 6(1)(b)(i) to (ix), or subsection 81(3.1) of the Act.

Exclusion under subsection 6(6)

Subsection 6(6) of the Act allows certain allowances in respect of personal or living expenses, normally considered a taxable benefit under paragraph 6(1)(b) of the Act, received by individuals employed at special work sites and remote work locations, to be excluded from income. Interpretation Bulletin IT-91R4 "Employment at Special or Remote Work Locations" explains the terms "special work site" and "remote work locations" and provides further details concerning the criteria for these exemptions.

Paragraph 6(6)(a) of the Act provides that there shall not be included any amount in a taxpayer's income that is the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses incurred by the taxpayer for, board and lodging at:

(i)a special work site,

(being a location at which the duties performed by the taxpayer were of a temporary nature, if the taxpayer maintained at another location a self contained domestic establishment as the taxpayer's principal place of residence which is available to that individual throughout the period, not rented to any other person, and a sufficient distance away that the employee could not be expected to return home on a daily basis)

or,

(ii)a remote work location

(being a location at which, by virtue of its remoteness from any established community, the taxpayer could not reasonably be expected to establish a self-contained domestic establishment).

The period during which the taxpayer was required to be away from the taxpayer's principal place of residence, or to be at the special work site or remote location, must not be less than 36 hours for the exclusion under paragraph 6(6)(a) of the Act to apply.

The reasonableness of an allowance is a question of fact. It must be related to the amount of actual expenses an individual is likely to incur in respect of the expenses for which the allowance is provided rather than being based on other factors such as levels of salary. Therefore, an allowance which is expected to cover expenses in addition to board, lodging and transportation would not be exempt by reason of subsection 6(6) of the Act.

Special work site

Some of the main requirements for the special work site exclusion under subparagraph 6(6)(a)(i) of the Act are that the duties performed must be of a temporary nature and that the individual maintains, at another location, a self contained domestic establishment as a principal place of residence to which, by reason of distance, the individual could not reasonably be expected to return on a daily basis.

Whether or not the requirements of subparagraph 6(6)(a)(i) of the Act are met is a question of fact that would have to be determined on a case by case basis. While it is also a question of fact as to whether a particular work site would qualify as a special work site for any particular employee, individual circumstances will determine whether, by reason of distance, the employee cannot reasonably be expected to return daily to the place where the employee maintained a self-contained domestic establishment. However, in the case of individuals who receive a living out allowance yet return home daily, we would consider that subsection 6(6) of the Act would not be applicable and the allowance received would be taxable unless otherwise excluded pursuant to one of the exceptions of subparagraphs 6(1)(b)(i) to (xi) of the Act.

Remote work location

It is our view that in making the determination as to whether the recipient of the allowance or benefit is entitled to exclude the amount by virtue of subparagraph 6(6)(a)(ii) of the Act, the first issue to be resolved is whether the individual could (or could not) reasonably be expected to establish and maintain a self-contained domestic establishment ("SCDE") at the location. If the individual could not, then the second issue is whether this inability to establish and maintain an SCDE is due to the location's remoteness from any established community. In making this latter determination, it is necessary to consider whether the worksite itself is an established community and, if not, whether there is an established community within a reasonable travelling distance from the worksite. Some general guidelines used in resolving these questions are contained in IT-91R4 at paragraphs 14 to 17.

There is a presumption that if an established community exists within a reasonable commuting distance from the work location, then the individual would be able to establish and maintain an SCDE near enough to the worksite to not be entitled to tax-free treatment on any benefit or allowance provided in respect of board and lodging.

Transportation to special work site or remote work location

Paragraph 6(6)(b) of the Act will exclude from income an allowance that is not in excess of a reasonable amount and that is received for transportation between an individual's principal place of residence and a special work site or a remote work location, in respect of a period of not less than 36 hours during which the individual is required to be away from his principal place of residence or to be at the special work site or remote work location, provided that the individual also receives board and lodging or a reasonable allowance for board and lodging for that same period of time from his or her employer.

When an individual is commuting to a particular work site on a daily basis, any transportation assistance would not be exempt by reason of paragraph 6(6)(b) because the work site would not qualify as either a special work site or a remote work location and because the individual would not have been required to be away from his residence for a period of not less than 36 hours.

Exclusion under paragraph 6(1)(b)

Subparagraphs (6)(1)(b)(vii) and (vii.1) of the Act exclude from income allowances received by an individual for expenses for travelling in the performance of the duties of employment away from the municipality or metropolitan area where the employer's establishment was located, as long as the allowance is reasonable. As mentioned above, the reasonableness of any particular allowance is a question of fact. However, for the purposes of subparagraph 6(1)(b)(vii.1), subparagraph 6(1)(b)(x) of the Act deems an allowance received in a taxation year by an employee for the use of a motor vehicle in connection with, or in the course of, an office or employment not to be a reasonable allowance if it is not calculated solely by reference to the number of kilometres for which the vehicle was so used in the year. However, if the allowance is unreasonable and is included in income, the employee may deduct travel expenses under subparagraphs 8(1)(h) and (h.1) of the Act if the requirements of those provisions are met.

Exclusion under subsection 81(3.1)

Subsection 81(3.1) of the Act refers to amounts received by an individual in respect of part-time employment as an allowance for or reimbursement of travel expenses during a period throughout which the individual has other employment or is carrying on a business. Such allowances are generally not included in income to the extent that they are paid by the employer and do not exceed a reasonable amount.

R. Albert
for Director
Business and Publications Division
Income tax Rulings and
Interpretations Directorate
Policy and legislation Branch