3 February 2012 External T.I. 2011-0418671E5 - Parking Expenses

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: Is a parking expense at a worksite a deductible employment expense if (1) an employee is required to provide his or her own tools for employment purposes, (2) due to the magnitude of the tools required to perform the work the employee must use his or her vehicle to transport the tools to the worksite, and (3) the tools cannot be left at that worksite and must be transported back and forth with the employee?

Position: Not by itself - all the requirements for the deductibility of employee travel expenses must still be met. It is always a question of fact in each particular case whether those requirements are met.

Reasons: A deduction for motor vehicle expenses incurred by an employee in the course of performing the duties of employment is permitted where the individual is required to carry on those duties away from the employer's place of business or in different places and the employee is responsible for such expenses. The fact that the tools cannot be left at the worksite may suggest that the employer does not have a "place of business" at a particular location but this can only be determined on a case by case basis through a review of all relevant facts in each situation.

XXXXXXXXXX
					2011-041867
					Andrea Boyle

February 3, 2012

Dear XXXXXXXXXX :

Re: Deductibility of Parking Expenses

This letter is in follow-up to a question which arose in the course of the teleconference of October 13, 2011. The question which arose was whether an employee would be entitled to deduct parking expenses when he or she needs to drive a vehicle to and from various worksites because the employee needs a vehicle in order to transport his or her tools to the worksite.

In this case the employees are unionized glaziers who report to worksites for various employers for durations of a day up to weeks and months. In this situation the tools required are significantly numerous and heavy so that there is no practical way to otherwise transport the tools. Also, the assumption is that the employees cannot safely leave their tools at the worksites between shifts and therefore they must transport the tools back and forth with them for every shift.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. We are however prepared to provide the following general comments in respect of the issue that you raised.

All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act").

As indicated in our previous correspondence, an employee not earning commission income may deduct parking expenses in the course of employment provided all the conditions in paragraph 8(1)(h.1) are met. This paragraph permits a deduction for motor vehicle expenses incurred where, among other things, the individual is required to carry out his or her employment duties away from the employer's place of business or in different places, and the employee is required by the contract of employment to pay such expenses.

Also, as previously indicated, travel between an employee's home and the place where that employee reports for work is generally considered to be personal travel and not employment-related travel and therefore parking expenses related that travel would normally not be deductible. It is our general view that, in the construction industry, if an employer does not maintain a significant field office at or near a particular worksite, such a worksite would not normally be considered as the employer's place of business or the employee's regular place of employment for purposes of deducting motor vehicle expenses.

The fact that an employee's tools cannot be left at a worksite may be one of a number of factors which could suggest that the employer does not have a place of business at a particular location, however, whether any given work location would be considered a place of business of a particular employer and/or a regular place of employment of a particular employee remains a question of fact that can only be determined on a case-by-case basis.

In other words, in order for the parking expenses to be deductible by the employee, all the requirements for the deductibility of employee travel expenses must still be met and it is always a question of fact in each particular case whether those requirements are met. Even though the employee has been issued a T2200 from the employer, the employee must still be able to justify the deduction of the expense if his or her return is selected for subsequent review by the Canada Revenue Agency.

We trust these comments will be of assistance.

Yours truly,

Doug Watson
for Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch