1 March 2011 External T.I. 2011-0394321E5 - Work Space in Home

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 telework meets the requirements on T2200 form - Declaration of Conditions of Employment of requiring an employee to work from home under a contract of employment.

Position: Question of fact, but in this situation probably yes

XXXXXXXXXX 				2011-039432
					Linda Compton
					(613) 957-2135
March 1, 2011

Dear XXXXXXXXXX :

Re: Technical Interpretation Request - Work Space in Home Expenses

We are writing in response to your e-mail dated January 31, 2011, in which you seek comments concerning the completion of section 10 of Form T2200, "Declaration of Conditions of Employment" ("T2200") in relation to work space in home expenses under a telework arrangement.

Our Comments:

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.

Given your fact situation, this discussion will focus on the rules as they apply to individuals who are not commissioned sales employees. Expenses incurred in the course of earning employment income may only be deducted if a deduction is specifically authorized by section 8 of the Income Tax Act (the "Act"). Subparagraph 8(1)(i)(iii) of the Act enables a taxpayer to deduct the cost of supplies that are consumed directly in the performance of the duties of employment, subject to meeting the additional conditions in subsection 8(13), which are described below. Under the authority of these provisions, an employee with a workspace in the home may be permitted to deduct such things as typical office supplies, as well as a reasonable proportion of expenses paid for the maintenance of the home, such as electricity, light bulbs and cleaning supplies. Interpretation Bulletin IT-352R2, Employees' Expenses, Including Work Space in Home Expenses ("IT352R2") discusses the circumstances under which a taxpayer may deduct amounts paid in the year for supplies in computing income from employment. Specifically, however, the taxpayer must be required by the contract of employment to supply and pay for the supplies in question. Further, no deduction is available if the taxpayer was reimbursed, or is entitled to be reimbursed for the expense.

Where an employee satisfies the requirements of paragraph 8(1)(i) of the Act, subsection 8(13) imposes further restrictions on deductions related to a home office. In particular, no amount can be deducted unless the work space is either:

(i) the place where the individual principally (more than 50% of the time) performs the office or employment duties, or

(ii) used exclusively during the period to which the expenses relate to earn income from the office or employment and, on a regular and continuous basis, for meeting customers or other persons in the ordinary course of performing the office or employment duties.

In order to claim the deduction, subsection 8(10) of the Act requires the employee to submit Form T2200, signed by the employer to certify that particular expenses were required to be incurred and that the employee meets the requirements of the particular provision in section 8 of the Act that authorizes the deduction. Your question specifically concerns the first question in Section 10 of Form T2200, which asks whether the employee is required by the contract of employment to use a portion of his or her home for work.

It is the CRA's view that although a telework arrangement may be voluntarily entered into, once an employee and the manager have entered into a formal telework arrangement, the employee is "required" to provide a work space in his or her home and pay for some additional costs associated with providing this work space. The formal telework arrangement need not be in writing provided the details of the arrangement are agreed to and clearly understood by both the teleworker and the manager.

Yours truly,

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