9 May 2011 External T.I. 2011-0397871E5 - Motor Vehicle 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: Whether certain motor vehicles expenses are deductible.

Position: General information provided

XXXXXXXXXX
									2011-039787
									Linda Compton
									(613)957-2135

May 9, 2011

Dear XXXXXXXXXX :

Re: Interpretation Request - Motor Vehicle Expenses

This is in response to your email of March 2, 2011, wherein you asked whether you could deduct motor vehicle expenses under paragraph 8(1)(h.1) of the Income Tax Act (the "Act") in the particular circumstances described in your email.

We understand that in the performance of your employment duties as a canine handler providing security services for your employer, you are required to travel to a location that is not owned or operated by your employer to pick up and drop off the dog with which you work. On these occasions you travel directly from home to the particular location where the dog is boarded and at the end of the work day, from the work location to the location where the dog is boarded and then return home.

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. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Comments

The rules concerning the deduction of motor vehicle expenses incurred in earning income from an office or employment are discussed in Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees, ("IT-522R"). In general terms, where it can be established that an employee's motor vehicle expenses are in respect of employment-related travel, such expenses may be deductible under paragraph 8(1)(h.1) of the Act. Expenses related to personal travel are not deductible.

Generally, it is the CRA's long-standing position that travel between an employee's home and his or her regular place of employment is personal travel. In this regard, any location at or from which the employee regularly reports for work or performs the duties of employment is considered a regular place of employment. However, where an employer requires an employee to proceed directly from home to a point of call other than the employer's place of business to which the employee reports regularly or to return home from such a point, these particular trips are not considered to be of a personal nature. As well, where an employee is required to travel directly from one work location to another work location, such travel is considered to be employment-related travel.

As indicated in paragraph 8(1)(h.1) of the Act an employee can deduct motor vehicle expenses if they meet all of the following conditions:

a) The employee 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;
b) The employee was required under the contract of employment to pay motor vehicle expenses incurred in the performance of the duties of the office or employment; and,
c) The employee did not receive a non-taxable allowance for motor vehicle expenses. Generally, an allowance is non-taxable when it is based solely on a reasonable per-kilometre rate; and,

Further, subsection 8(10) of the Act requires that a T2200 Declaration of Conditions of Employment Form must be signed by an employer in order for an employee to claim deductions for employment-related motor vehicle expenses under paragraph 8(1)(h.1) of the Act.

General information can be found about travel expenses found in Chapter 3 of T4044 Employment Expenses is available on our website at http://www.cra-arc.gc.ca/E/pub/tg/t4044/README.html.

We trust the above general comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch