28 June 2011 External T.I. 2011-0404151E5 - Special Work Site

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: 1. Whether certain employees temporarily employed at a work site location qualify for the special work site exemption pursuant to subsection 6(6) of the Act? 2. Whether a change in an employee's manager determines if a work location qualifies as a special work site for purposes of subsection 6(6) of the Act? 3. Whether having permanent employees employed at a work location impacts whether the location can qualify for a special work site exemption for other employees under subsection 6(6) of the Act? 4. Does having a permanent work location in a major city impact on whether it can qualify as a special work site under subsection 6(6) of the Act?

Position: 1. Question of fact. 2, 3, & 4: No. Will depend on the facts of each case.

Reasons: 1. All conditions of subsection 6(6) of the Act must be met in order to qualify as a special work site for each employee. It is a question of fact whether each employee's situation would meet the conditions in subsection 6(6) of the Act. 2. 3. & 4. A change in an employee's manager does not impact whether a particular work site can be considered a special work site under subsection 6(6) of the Act. Having permanent employees employed at a work location does not impact on whether the location qualifies as a special work site under subsection 6(6) of the Act for other employees. Having a permanent work location in a major city does not impact whether the location can qualify for a special work site exemption for temporary employees under subsection 6(6) of the Act. Instead, all conditions of subsection 6(6) of the Act must be met for a work site to qualify as a special work site for purposes of subsection 6(6) of the Act.

XXXXXXXXXX
									2011-040415
									C. Underhill 

June 28, 2011

Dear XXXXXXXXXX :

Re: Special Work Site

I am writing in response to your e-mail of April 26, 2011 concerning the taxation of a special work site. More specifically, you have enquired whether the special work site provisions under subsection 6(6) of the Income Tax Act (the "Act") would apply to certain employees temporarily employed at a work site location. You have also enquired whether a change in management, the location of the work site, or having permanent employees work at the same location would impact the determination of a special work site for purposes of subsection 6(6) of the Act.

In the situation you described, an employer has several work sites ("shops") and drilling rigs located in Canada. You have indicated that a drilling rig qualifies as a special work site since all of the conditions in subsection 6(6) of the Act are met. When an employee is injured at a drilling rig, the employee is temporarily relocated to a shop location where he/she is required to perform modified duties. Regular full-time employees are also employed at the various shop locations. You further indicated that the special work site provisions under subsection 6(6) of the Act do not apply to permanent employees employed at the shop locations.

Our Comments

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.

Generally, the value of employer-provided board and lodging or transportation to and from a particular work location is included in an employee's income for income tax purposes pursuant to subsection 6(1) of the Act. However, subsection 6(6) of the Act provides an exception in limited circumstances for employment at a special work site or a remote work location.

Subparagraph 6(6)(a)(i) of the Act provides for an exclusion from an employee's income, for the value of employment benefits received or enjoyed, or a reasonable allowance in respect of, expenses incurred by the employee for board and lodging at a special work site. The conditions which must be met for a particular work location to be considered as a special work site or a remote work location in respect of a particular employee are explained in paragraph 4 of Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations. It is important to note that for the special work site benefit exclusion to apply, all of the following requirements must be met:

1. The duties of the office or employment performed by the individual at the work location must be of a "temporary nature",

2. Throughout the period that the individual performed the duties of the office or employment at the work location, the individual must maintain at another location a self-contained domestic establishment as his or her principal place of residence, which was available for the individual's occupancy and not rented by the individual to any other person,

3. The distance between the individual's principal place of residence and the work location must be such that the individual cannot reasonably be expected to commute daily, and

4. The period the individual is required to be away from the principal place of residence at the work location because of the duties of the office or employment must be at least 36 hours.

Paragraphs 5 and 6 of IT-91R4 provide comments on whether employment duties at a special work site will be considered temporary. As noted in paragraph 5, the phrase "duties performed by the taxpayer were of a temporary nature" refers to the duration of the duties performed by the individual employee, not the expected duration of the project as a whole. Paragraph 6 clarifies that, where the duties are expected to provide the individual with continuous employment beyond two years, as determined at the outset, those duties are generally not considered to be of a temporary nature. However, there may be situations where an employment period extends beyond two years, where it will be appropriate to consider the duties to be of a temporary nature. The determination of the expected duration of employment must be made on the basis of the facts known at its commencement and consideration should be given to the factors listed in paragraph 6 of IT-91R4.

The application of subsection 6(6) of the Act is a question of fact that can only be determined on a case-by-case basis. Based on the limited information provided, we are unable to determine whether a particular shop location meets the requirements in subparagraph 6(6)(a)(i) of the Act for each of your employees.

A change in an employee's manager, the fact that permanent employees are employed at a particular shop location, or the fact that the shop location is permanent or established in a major city does not impact whether the special work site provisions under subsection 6(6) of the Act would apply to certain employees. It is our view that where an employee satisfies all of the requirements in subsection 6(6) of the Act, reasonable amounts for board and lodging provided by the employer for a period while the employee is at the special work site would not be considered a taxable benefit for income tax purposes.

We trust these comments will be of assistance.

Yours truly,

Phyllis Waugh
A/Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch