29 July 2010 Internal T.I. 2010-0370771I7 - Non-taxable mileage allowance

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: Does the exception apply in the particular situation.

Position: Question of fact but the conditions of 81(3.1) appear to be met.

Reasons: The law.

							July 29, 2010

	Ottawa TSO	HEADQUARTERS
	Revenue Collections			Income Tax Rulings
							   Directorate
	Attention: Denyse Cartier-Beaudin	Michael Cooke, C.A.

							2010-037077

Taxation of Mileage Allowance

We are writing in response to your memorandum dated June 9 2010, wherein we were asked whether a particular mileage allowance received XXXXXXXXXX (the "Taxpayer") is taxable under the Income Tax Act (the "Act").

Facts/Background:

The Taxpayer resides in XXXXXXXXXX , Ontario. The Taxpayer appears to be employed on a full-time basis by XXXXXXXXXX ("Employer A"). The Taxpayer also appears to be employed on a part-time basis as a XXXXXXXXXX by XXXXXXXXXX ("Employer B").

Employer B pays the Taxpayer a mileage allowance for travel between the Taxpayer's home in XXXXXXXXXX and place of part-time employment in XXXXXXXXXX . The distance between the Taxpayer's home and place of part-time employment in XXXXXXXXXX is approximately XXXXXXXXXX kilometres. The distance between the Taxpayer's place of full-time employment with Employer A in XXXXXXXXXX and place of part-time employment with Employer B in XXXXXXXXXX is also approximately XXXXXXXXXX kilometres.

Employer B has included the amount of the mileage allowance as a taxable benefit on the T4 slip it has issued to the Taxpayer.

Issue:

The issue is whether subsection 81(3.1) of the Act will apply to exclude the amount of the mileage allowance the Taxpayer received from Employer B from the Taxpayer's income.

Our Comments:

Subsection 81(3.1) of the Act excludes from income certain amounts that would otherwise be considered income from office or employment where certain conditions are met. Specifically, subsection 81(3.1) of the Act excludes a reasonable allowance or reimbursement of expenses for the personal travel received by a part-time employee from an arm's length employer where the particular part-time employee also had other employment or was carrying on a business throughout the period in which the travel expenses were incurred (emphasis added). In order for this exception to apply, the particular individual's part-time employment duties must be performed at a location that is not less than 80 kilometres from both that individual's ordinary place of residence and the other place of employment or place of business.

We understand that Employer B has not excluded the mileage allowance from the Taxpayer's T4 even though it appears to be aware that the particular allowance is exempt from tax under subsection 81(3.1) of the Act. Employer B may be concerned with failing to meet its reporting obligations if for some reason this exemption did not apply as there appears to be no prescribed form (such as a TD4) that would establish that the employer could exclude the amount from the T4. There is no mention of this particular exemption in the RC4120, Filing the T4 Slip and Summary - Employers' Guide (http://www.cra-arc.gc.ca/E/pub/tg/rc4120/rc4120-e.html#P266_21423). However, the T4130, Employers' Guide Taxable Benefits and Allowances indicates the following:

Part-time employee

If you give a part-time employee a reasonable allowance or reimbursement for travelling expenses incurred by the employee going to and from a part-time job, and you and the part-time employee are dealing at arm's length, you do not have to include the amount in the employee's income. This applies to:

Teachers and professors who work part time in a designated educational institution in Canada, providing service to you as a professor or teacher, and the location is not less than 80 kilometres from the employee's home.

A part-time employee who had other employment or carried on a business, and he or she did the duties at a location no less than 80 kilometres from both the place of the employee's home and the place of the other employment or business.

Assuming the above-described facts are not in dispute, it is our view that subsection 81(3.1) of the Act would apply to the mileage allowance received by the Taxpayer from Employer B.

We trust the foregoing 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