21 December 1998 External T.I. 9821615 - TRAVEL ALLOWANCES

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:

1) Is a vehicle allowance paid to an employee (based on kilometers travelled from office to work site) who travels from home and reports every morning and evening for clerical and management purposes at the office after returning from the work site non-taxable ?

2) Is a vehicle allowance paid to an employee(based on kilometers travelled from office to work site) who travels from home to the office to fuel a machine located at the work site .

Position:

1) Amount may likely qualify as a non-taxable allowance

2) Amount is generally taxable but there may be a non-taxable portion with regards to the travel from home to office,

Reasons:

Purpose of trip is a question of fact

XXXXXXXXXX 982161
C. Tremblay
Attention: XXXXXXXXXX

December 21, 1998

Dear Madam:

This is in reply to your letter of August 13, 1998, requesting our opinion on whether travel allowances paid to employees in the following two hypothetical situations would be considered taxable benefits in the scenario outlined below:

1. The employer operates in the forestry sector and harvests timber for sale.

2. The employer’s office is situated in the urban locality and the timber site is approximately 100 kilometers from the office.

3. Employees would receive a travel allowance for travel between the office and the timber site.

4. Employees would provide their own vehicles.

5. Employees would return home on a daily basis.

In the first situation, the employee would report to the office every morning before going to the timber site and every evening upon returning from the timber site. He has to be in the office each morning and evening for clerical and management purposes. He would receive a fixed monthly travel allowance (calculated on a “per kilometer” basis) for the distance travelled between the office and the timber site.

In the second situation, the employee would have no daily obligation to report to the office, although he would have the responsibility of fueling a machine located on the timber site. For this, he would use his own vehicle to get the fuel (near the office) and bring it to the machine. He would receive a fixed monthly allowance (calculated on a “per kilometer” basis) for the distance traveled between the fuel pumps and the timber site.

You have requested our views on whether a reasonable allowance received by an employee would be considered as being in the course of performing the duties of the office or employment for the purposes of subparagraph 6(1)(b)(vii.1) of the Act.

Our Opinion

The above situations appear to involve a series of actual ongoing or proposed transactions involving specific taxpayers. If so, we suggest that you discuss your questions with officials in your local Taxation Services Office, who have the responsibility to assist in determining the tax consequences of completed transactions and their implications to the specific taxpayers. If the situation outlined in your letter relates to specific proposed transactions, it is the practice of this Department to comment on such transactions only by way of advance ruling. However, we can offer the following general comments which we hope will be of assistance to you.

Assuming that none of the eligible employees are employed in connection with the selling of property or negotiating of contracts for the employer, the tax treatment of an allowance paid for the use of a motor vehicle in the above circumstances depends on whether the conditions in subparagraph 6(1)(b)(vii.1) of the Act are satisfied. The allowance must be:

a) a reasonable amount

b) received for travelling in the performance of the duties of the office or employment.

The Department’s long standing general position is that travel between an employee’s home and the employer’s place of business is personal in nature. Furthermore, the employer’s place of business does not necessarily refer to the head office or any administrative office but rather to the location for which the employee was hired. We suggest that you consider the comments in paragraph 49 of IT-522R, Vehicle, Travel and Sales Expenses of Employees as well as the definition of “place of business” in paragraph 32(c) of the same bulletin. In our view, the primary purpose of any such trip is always a question of fact.

If in fact the employee in the first scenario has to report to the employer’s office in the urban locality for clerical and management purposes before proceeding to the timber site, then it is likely that the employee may be considered to be travelling in the performance of the duties of the office or employment for the purposes of subparagraph 6(1)(b)(vii.1)of the Act. In regard to the second scenario, it is likely that the primary purpose of the trip to the timber site is personal in nature even though an employment activity takes place during the course of that trip. Thus, such an employee would not likely be considered to be “travelling in the performance of the duties of the office or employment.”

We trust our comments will be of assistance to you

Yours truly,

J. F. Oulton, CA
for Director,
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch