2 November 2010 External T.I. 2010-0383551E5 - Moving 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 moving expenses paid for by the former employer and then later repaid by an individual pursuant to a termination agreement are eligible for the deduction under subsection 62(1) of the Act.

Position: Yes, the payment is deductible in the year paid against income from the new work location earned in the year of payment, and as long as all of the conditions of subsection 62(1) are met. The expenses may not be carried back to a previous year.

Reasons: Pursuant to subsection 62(1), eligible moving expenses paid by the taxpayer in a year subsequent to an eligible relocation may be claimed in the year in which they are paid.

XXXXXXXXXX
									2010-038355
									T. Posadovsky

November 2, 2010

Dear XXXXXXXXXX :

Re: Moving Expenses

We are writing in reply to your correspondence dated October 12, 2010, concerning moving expenses repaid by an individual to a former employer and the eligibility of those amounts for the deduction under subsection 62(1) of the Income Tax Act (the "Act").

In the situation you described, you had entered into an agreement whereby your new employer would pay for your moving expenses in order to relocate from XXXXXXXXXX to a new work location in XXXXXXXXXX . The 2005 agreement required that you remain employed by the employer for five years after the move. If you were to leave before the expiry of the five-year period, you would be required to repay to the employer a prorated portion of the moving expenses. In 2009, you resigned your position before the expiry of the five-year retention period and repaid a portion of the moving expenses in accordance with the terms of the agreement. You ask if this payment is deductible under subsection 62(1) of the Act. Further, you ask whether you are able to claim previously unclaimed meal expenses incurred in connection with this move.

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 an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings. As noted in paragraph 7 of IC 70-6R5, the Canada Revenue Agency ("CRA") will not provide an advance ruling on a completed transaction. Where a situation involves a specific taxpayer and a completed transaction, the request should be addressed to the relevant tax services office. 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 and are not binding on the CRA.

Subsection 62(1) of the Act allows an individual to deduct eligible "moving expenses", as defined in subsection 62(3), when the individual moves to begin employment or business at a new work location or to begin full-time attendance at a qualified educational institution. To qualify, the individual's move must, among other things, meet the definition of an "eligible relocation" in subsection 248(1). The new residence must be at least 40 kilometres (by the shortest usual public route) closer to the new place of work or educational institution.

Assuming there is an eligible relocation, in order for a particular moving expense to be deductible by a taxpayer, the amount must actually be paid. For instance, if eligible moving expenses are paid by anyone other than the taxpayer, including the taxpayer's employer, such amounts would not be deductible. If an employer pays or reimburses an employee for only part of the moving expenses, the remainder is deductible by the employee to the extent that it constitutes an eligible moving expense.

Eligible moving expenses must be deducted in the year that they are paid; however, the amount claimed cannot be more than the income earned at the new work location. Any excess may be carried forward and deducted in a year subsequent to the year of the move to the extent of income earned at the new work location. Eligible expenses paid in a year following the year of the move cannot be carried back to a previous year. Where an employee repays an employer for otherwise eligible moving expenses in respect of a move that occurred in a previous year, a deduction may be claimed on the employee's tax return for such expenses in the year of payment, but only to the extent of employment or self-employment income earned at the new work location in that year.

To address your second question, a taxpayer may claim previously unclaimed eligible moving expenses as long as they meet the requirements of subsection 62(1) of the Act. This includes moving expenses, such as the cost of meals under either the direct or simplified method, for a period not exceeding 15 days. It should be noted, however, that if an employer provided an allowance or reimbursed the employee for the cost of meals, no such deduction would be allowed. Examples of eligible moving expenses are outlined in Interpretation Bulletin IT-178R3- CONSOLID, Moving Expenses, which is available on our website at www.cra-arc.gc.ca/E/pub/tp/it178r3-consolid/it178r3-consolid-e.html.

Requesting an adjustment for unclaimed expenses, in respect of an individual's Income Tax and Benefit Return that is beyond the normal three-year reassessment period, can be made through the CRA's taxpayer relief provisions. Such requests are limited to 10 calendar years preceding the calendar year in which the request is made. Detailed instructions on how to make such a request are provided at: www.cra-arc.gc.ca/gncy/prgrms_srvcs/txpyrrlf/menu-eng.html, and in Part IV of Information Circular IC 07-1, Taxpayer Relief Provisions.

We trust our comments will be of assistance.

Yours truly,

Randy Hewlett
Manager
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch