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:
XXXXXXXXXX has expressed concerns that there is no provision in the Income Tax Act which permits a deduction to employees for the cost of acquiring mechanics’ tools.
Position:
Subparagraph 8(1)(i)(iii) refers to the “cost of supplies consumed” but this does not contemplate the deduction of mechanics’ tools since they cannot be consumed.
The Standing Committee on Finance examined the issue of employment expenses, including the non-deductibility of mechanics’ tools. The Committee received submissions from the Canadian Automobile Repair and Service Institute regarding this issue and presented its report to the House of Commons on June 10, 1992. The Committee concluded that the issue of employment expenses was complex and therefore, no recommendations were made regarding legislative changes.
I spoke to Robert Dubrule at the Department of Finance on February 27, 1998, and he indicated that there are no proposed legislative changes regarding the deduction of mechanics’ tools.
Reasons: A copy of the Committee’s report will be sent to XXXXXXXXXX for his information. As he has already sent a copy of his letter to the Minister of Finance, no further action is required .
April 21, 1998
XXXXXXXXXX
Dear XXXXXXXXXX:
The Honourable Herb Dhaliwal, Minister of National Revenue, has asked me to reply to your letter of February 1, 1998, regarding auto mechanics who are employees and require under the terms of their employment to purchase their own tools.
Generally, there is no provision in the Income Tax Act which permits employees to deduct the cost of purchasing employment-related equipment. If an employer reimburses employees or makes payments to offset the costs of tools that employees are required to have in order to perform their work, the amount of the payment or reimbursement is required to be included in the employees’ incomes. Similarly, if an employer supplies equipment such that ownership of the equipment is transferred to the employees or the equipment is otherwise permitted to be used for personal reasons by the employees, a taxable benefit will generally result.
The issue of deductions for employees’ expenses has previously been discussed before the Standing Committee on Finance. The Canadian Automotive Repair and Service Institute raised some of the same issues you have raised. In this regard, I enclose a copy of the report tabled in the House of Commons on June 10, 1992, which highlights some of the difficulties in finding an equitable solution to this issue. A legislative solution would be required in these circumstances.
I note that you have forwarded a copy of your letter to the Honourable Paul Martin, Minister of Finance, who is responsible for amendments to the Act. I trust he will give your comments every consideration.
I appreciate the opportunity to respond to your concerns.
Yours sincerely,
Denis Lefebvre
Assistant Deputy Minister
Policy and Legislative Branch
Enclosure
Gwen Moore
March 11, 1998
952-1506
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