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.
Principal Issues: Are travel expenses deductible for construction workers reporting to different construction sites of employer under 8(1)(h.1)
Position: Where construction employees are required to report to different work sites, each work site is considered an employer's place of business and related travel costs to various work locations are not deductible
Reasons: Definition of 'employer's place of business' and different places as previously interpreted and as discussed in draft position paper. Each construction site is considered a regular place of employment, not a 'different place.'
September 23, 1998
Re: Employment Expenses
We are writing to you in response to XXXXXXXXXX's October 21, 1997 letter to the XXXXXXXXXX Tax Services Office. XXXXXXXXXX requested our views on whether an employee can claim employment expenses in five sample employment scenarios described in his letter. This inquiry was prompted by a number of employees requesting that Form T2200, Declarations of Conditions of Employment, be signed by XXXXXXXXXX as employer. We apologize for the delay in responding.
The employment circumstances provided to us were as follows:
The employee lives in XXXXXXXXXX and as a result of seniority takes a three month call in XXXXXXXXXX. There is no room and board paid by XXXXXXXXXX. The employee's initial hiring point and place of business, for XXXXXXXXXX's purposes, becomes XXXXXXXXXX, where XXXXXXXXXX has an established office and warehouse.
The same employee, after two months of work in XXXXXXXXXX, is asked to report to XXXXXXXXXX, 50 kms north of XXXXXXXXXX. The employee received a taxable allowance of $XXXXXXXXXX/day for each day he reports to work at XXXXXXXXXX where XXXXXXXXXX has an established office and warehouse.
An employee resides and works in XXXXXXXXXX, his assigned headquarters and original hiring point and place of business. The employee is requested to report to a temporary job site 70 kms from his headquarters, for two weeks. The employee receives a taxable allowance of $XXXXXXXXXX/day and uses his own transportation to get to the temporary work site. The temporary work site was a structure on a XXXXXXXXXX right-of-way.
The employee described in point 3 is requested to report to another temporary work site on a XXXXXXXXXX right-of-way for two weeks and receives a taxable allowance of $XXXXXXXXXX/day. In this case, the employee travels a shorter distance from home to his temporary work site than to his assigned XXXXXXXXXX headquarters.
The employee described in point 3 is subject to layoff in XXXXXXXXXX because of a lack of work. Because of seniority this employee bumps a junior employee working in XXXXXXXXXX. He reports for work in XXXXXXXXXX for two months, assuming local hire conditions (no room and board).
In the Construction Department of XXXXXXXXXX, we understand that a majority of the employees are classified as full-time temporary employees and usually work XXXXXXXXXX months each year. XXXXXXXXXX temporary work sites are feasible during this employment period.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transaction are proposed and are the subject matter of an advance ruling request. The procedure for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. However, we are prepared to provide the following comments which are of a general nature.
Employees may deduct in computing their taxable income only expenses specifically provided for in the Income Tax Act (the "Act").
Paragraph 8(1)(h.1) provides a deduction:
(h.1) where the taxpayer, in the year,
(i) was ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places, and
(ii) was required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment, (for) amounts expended by the taxpayer in the year in respect of motor vehicle expenses incurred for traveling in the course of the office or employment, except where the taxpayer
(iii) received an allowance for motor vehicle expenses that was, because of paragraph 6(1)(b), not included in computing the taxpayer's income for the year, or
(iv) claims a deduction for the year under paragraph (f) (sales expenses).
If the employee meets these requirements, a deduction may be claimed for reasonable amounts actually spent. We understand the employees are not in receipt of a non-taxable allowance and are not claiming deduction for these expenses under any other provision of the Act. Accordingly, we must examine whether the requirements of (i) and (ii) above are met.
The employee must be required under contract of employment to pay these expenses. This ordinarily necessitates that there be an express requirement within the terms of a written contract of employment. However, it is the Department's general position that this requirement may also be considered to be satisfied where it is tacitly understood by the employer and the employee that the employee will pay the travel expenses. This will be a question of fact and can only be determined through a review of the circumstances present in each case.
Although the signing of the T2200 by the employer is a prerequisite in order for an employee to be able to claim a deduction for certain employment expenses, a signed T2200 does not provide an employee with any assurance that any expenses incurred are deductible since the Act contains other criteria that the employee must satisfy. In addition, where the required conditions are not met, it would follow that the employer should not complete form T2200.
In all of the scenarios described, employees are required to work at different job sites. As noted earlier, we understand an employee could work at XXXXXXXXXX different locations over the course of a XXXXXXXXXX month period of employment. In some cases, the employees are in receipt of a taxable allowance. In our view, an employee (employed on a more-or-less permanent basis) who spends most of his time working at places where the employer is carrying out contracts (each such place being the employer's place of business) would not be traveling in the performance of the duties of the office or employment when the employee is traveling from his or her residence to the employer's place of business. Expenses of travel from home to work are personal. However, travel between job sites during the course of the work day by an employee in order to carry out a contract or contracts would be traveling in the performance of the duties of the office or employment. Accordingly, the employee in these scenarios would not be entitled to deduct travel costs under paragraph 8(1)(h.1), except when traveling between employer work sites to perform employment duties at different sites during the course of the work day.
We have enclosed the Interpretation Bulletins as requested. We have arranged for the XXXXXXXXXX Tax Services Office to forward twelve copies of the T4044, Employment Expense Guide to your attention.
We trust that these comments will be of assistance.
Roberta Albert, CA
Business and Publications Division
Income Tax Rulings and
Policy and Legislation Branch
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