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Citation: 2006TCC187
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Date: 20060328
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Docket: 2005-2043(IT)I
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BETWEEN:
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ALEXANDRE TOUTOV,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Bowman, C.J.
[1] These appeals are from assessments made under the Income Tax Act for the appellant's 2000, 2001 and 2002 taxation years. They involve the refusal of the Minister of National Revenue to allow Dr. Alexandre Toutov to deduct certain travel expenses between his home where he maintained an office and in which his work was principally done and his employers' office which he visited from time to time to meet clients and in which he had no office.
[2] The general rule of course is that the cost of travelling from one's home to one's place of work is not a deductible expense. This has been settled law for many years. The leading authority in support of this proposition is the House of Lords decision in Ricketts v. Colquhoun, [1926] A.C. 1, which was followed by the Federal Court of Appeal in Hogg v. R., [2002] 3 C.T.C. 177.
[3] The general rule is not inflexible and it admits of exceptions in some circumstances. The appellant holds a doctorate in mathematics from Queen's University in Kingston. Upon his graduation, he was offered employment by Oracle Telecomputing Inc. ("Oracle"). The letter from the President of Oracle reads as follows:
August 1, 1996
RE: Job Offer
Alexandre Toutov
119 McMichael Street
Kingston, Ontario
K7M 1N1
Dear Alexandre
We are pleased to offer you a position as Programmer at an annual salary of $38,000 subject to a review after 6 months.
We understand the financial hardship you will experience, because of the loss of your wife's income, if you transfer to Ottawa. Consequently, you can work out of your home in Kingston but will be required on occasion to visit customers in Ottawa, Carleton Place (e.g. design reviews, testing, etc.) and other locations, as new contracts dictate. However, because of the flexibility we are giving you in working at home, we expect you to cover Travel and Living costs on those occasions you travel to Ottawa/Carleton Place.
Please note the following:
1. Salary paid bi-weekly.
2. Two weeks vacation annually and three weeks after five years.
3. It is mandatory that you join the company group benefits plan.
It is mandatory that you sign a non-disclosure agreement.
If you should have any questions, please do not hesitate to contact me at the above number.
Yours truly,
Jim Harvey
President
[4] The appellant's real base of operations is the office in his home, where he has equipment (including, at times, six computers). He travels to Carleton Placewhere he meets clients but he has no office there. Frequently he passes through Carleton Placeon his way to Ottawa. It is I think a fair conclusion on the evidence that his office in Kingstonis an extension of Oracle's place of business and Mr. Toutov's principal place of employment. This was confirmed by Mr. Jim Harvey, the President of Oracle. Mr. Harvey had previously submitted a letter to the Canada Revenue Agency and it confirmed his oral testimony. It read:
December 30, 2002
Canada Customs and Revenue Agency
Tax Agency
St. John's, Newfoundland
A1B 3Z1
To Whom It May Concern:
Alexandre Toutov has been employed by Oracle Telecomputing Inc. since August 19, 1996. During this time he was working primarily out of his home office in Kingston, Ontario. The nature of his work required him to be at the company headquarters in Carleton Place regularly once a week for a day or two and occasionally in Ottawa, Cornwall and Toronto.
If you should have any questions, please do not hesitate to contact me at the above number.
Yours truly,
Jim Harvey
President
[5] Mr. Harvey also stated that Mr. Toutov's proximity to Queen's University in Kingston, with which he had a professional relationship and with which he consulted, was valuable to the business of Oracle. I regard Mr. Toutov's office in his home as an extension of Oracle's place of business and as his principal place of employment. From that place he travels to other places, including Ottawa, Cornwalland Carleton Placewhere he meets clients.
[6] Counsel for the Respondent, Mr. Tétrault, to his credit, brought to my attention a number of cases in which the fact situation was similar to the one with which I am faced here and which enunciate the principle which I intend to follow here. The first is Campbell et al. v. The Queen, 2003 DTC 420, in which Justice Margeson held that the cost of travelling between the appellant's home offices and school board buildings was not a taxable benefit under paragraph 6(1)(b) of the Income Tax Act. The Honourable Justice Margeson said at paragraphs 13 to 18:
13 The evidence established beyond any doubt that when they left their offices in their homes and went to some other place to conduct business they were going from one place of business to another place of business and they did so when they were returning to their home offices. The Court does not consider it significant that after they came home they might have gone to bed or turned on the TV or had a sandwich or raided the refrigerator, whatever the case may be. That does not militate against a finding that they were involved in business related activities on the way home.
14 When they went from their home office to the School Board in Port Hastings, they were engaged in carrying out their duties of a School Board member and they were doing the same thing when they were on their way home. They come squarely within the provisions of subparagraph 6(1)(b)(vii.1) of the Act.
15 In R. v. Deimert (1975), 75 D.T.C. 262 (T.R.B.), page 10, paragraph 38 says:
It is a variant on the category of itinerant jobs that the concept of two places of work has been introduced particularly in Owen v. Pook, [1969] 2 All E.R. 1, and Taylor v. Provan, [1974] 1 All E.R. 1201, both decided by the House of Lords. Basically, that variant is that if a man has to travel from one place of work to another place of work he may deduct the expense of this travel because he is travelling on his work, but not those of travelling from either place of work to his home or vice versa unless his home happens to be a place of work. For this concept to apply, the facts must be that the work or the job must be done in two places. It is not enough that the man might choose to do part of the work in a place separate from where the job is objectively located.
16 Here, the Court is satisfied that there were two places of work. The trips that gave rise to the claim for the expenses and their deductibility in each case was from one place of work, (the office in the home) to another place of work (the School Board office), which was located in Port Hastings. All of the expenses that they claimed were related to the use of their vehicles, for travelling, in the performance of their duties of their office as School Board members.
17 Counsel also referred to Goldhar v. Minister of National Revenue, [1985] 1 C.T.C. 2187, 85 D.T.C. 202 (T.C.C.), where Taylor J. allowed the taxpayer's claims on the basis that it was established that she worked out of her house, which was her "base of operations'. The same can be said of the case at bar. The case of Hoedel v. R. (1986), 86 D.T.C. 6535 (Fed. C.A.), a case decided by the Federal Court of Appeal also offers some consolation to the Appellants pleas. Counsel also referred to Sword v. Minister of National Revenue, [1990] 2 C.T.C. 2298, 90 D.T.C. 1798 (T.C.C.), but this Court does not find that case particularly helpful.
18 In McDonald v. R., [1998] 4 C.T.C. 2569, 98 D.T.C. 2151 (T.C.C.), Judge Rip indicated that:
...an employee also may have only one fixed work location but is required to travel to other places where the employer carries on business or for a business purpose. If it is more efficient or cost effective to the employer for the employee to begin or complete such trips at the employee's home, then such travel ought not be characterized as personal.
That factual situation is reflected by the evidence given in the case at bar.
I am in respectful agreement with Justice Margeson's reasoning and conclusion.
[7] In Daniels v. The Queen, 2004 DTC 6276, the Federal Court of Appeal distinguished, but referred apparently with approval, to Justice Margeson's decision. There has been a considerable amount of jurisprudence on the question in the United Kingdom. There is a very full discussion in Kirkwood v. Evans, [2002] 1 W.L.R. 1794, 74 T.C. 481.
[8] I do not propose to deal with the English authorities because the legislation is somewhat different and in any event I am in full agreement with the reasoning of Justice Margeson which I consider to be dispositive of the issue.
[9] The appeals are allowed with costs, if any, and the assessments are referred back to the Minister of National Revenue for reconsideration and reassessment to allow the appellant to deduct the travel expenses claimed.
Signed at Ottawa, Canada, this 28th day of March 2006.
Bowman, C.J.
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