20 January 2010 External T.I. 2009-0335451E5 - Motor Vehicle Allowances

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: Is a particular location an employee's regular place of employment (RPE) and can expenses for travel between the employee's home and a location that is not the employee's RPE be deductible?

Position: Question of fact, but in this case the location does not appear to be an RPE. Deduction will depend on whether any allowance is included in the employee's income.

Reasons: The law and CRA's administrative position.

XXXXXXXXXX 							2009-033545
								Michael Cooke, C.A.
January 20, 2010

Dear XXXXXXXXXX :

Re: Motor Vehicle Allowances

We are writing in response to your correspondence of August 5, 2009 ("original correspondence"), and your follow-up questions as to whether certain per kilometre motor vehicle allowances paid by an employer would qualify as reasonable allowances for the purposes of paragraph 6(1)(b) of the Income Tax Act (the "Act"). We also note that on November 16, 2009, we had provided you with severed copies of two Technical Interpretations (2005-011506 and 2005-012256) that in our view addressed the issues raised in your original correspondence.

Briefly, we understand that you would like CRA to confirm whether a client's personal residence would be considered as an employee's regular place of employment based on the circumstances described in your original correspondence. You also ask whether an employee can deduct motor vehicle expenses under paragraph 8(1)(h.1) of the Act for travel between the employee's personal residence and a client's personal residence to attend a meeting where such travel occurs at the commencement or end of the particular employee's work day and the employer does not compensate the employee for such motor vehicle travel expenses.

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 an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Rulings", dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Canada Revenue Agency ("CRA") Tax Services Office. A list of TSOs is available on the "Contact Us" page of the CRA's website as well as copies of any publications mentioned herein. Notwithstanding the foregoing, we are prepared to offer the following comments.

The reasonableness of any motor vehicle allowance is always a question of fact. A reasonable per-kilometre allowance received by an employee for the use of his or her personal motor vehicle in connection with the duties of employment is generally excluded from employment income by virtue of paragraph 6(1)(b) of the Act. Subparagraph 6(1)(b)(vii.1) of the Act, for example, excludes "reasonable allowances for the use of a motor vehicle received by an employee (other than an employee employed in connection with the selling of property or the negotiating of contracts for the employer) from the employer for travelling in the performance of the duties of the office or employment".

What constitutes "travelling in the performance of the duties of the office or employment" is discussed in Interpretation Bulletin IT-63R5, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992. In general terms, travel between an employee's home and regular place of employment is considered personal and it will always be a question fact whether a particular work location is considered a regular place of employment. However, where an employee (as required by the employer or with the employer's concurrence) proceeds directly from home to a point of call other than the employee's regular place of employment, or returns home from such a point, such travel is considered employment-related.

While a question of fact, in the circumstances described in your original letter, simply because an employee is required to meet with a particular client from time to time at the client's personal residence would not result in that location being considered as the employee's regular place of employment.

As noted in Technical Interpretation 2005-011506, motor vehicle expenses incurred by an employee for travelling in the course of employment may be deducted in computing employment income under paragraph 8(1)(h.1) of the Act. Where an employee receives any motor vehicle allowance during a taxation year that was, because of paragraph 6(1)(b) of the Act, not included in computing the employee's income for the year, no employment-related motor vehicle expenses may be claimed under paragraph 8(1)(h.1) of the Act. However, if the employee can show that the employment-related motor vehicle expenses are in excess of the motor vehicle allowances that were not included in income because of paragraph 6(1)(b) of the Act (i.e., the allowances are unreasonable relative to the employee's "out-of-pocket" costs) and voluntarily includes the amount of all such allowances in income, the CRA will generally permit the deduction if the requirements in section 8 of the Act are otherwise met.

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