9 February 2006 External T.I. 2005-0152401E5 - Employees' Motor Vehicle 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: (i) Is driving between work locations during the course of the workday personal or employment related travel? (ii) If a non-taxable allowance is received for only certain employment travel, can a deduction be claimed for additional employment related travel? (iii) Is driving between home and various work locations personal travel?

Position: (i) Travel between work locations during the course of a workday is likely employment related travel. (ii) Possibly. (iii) Question of Fact

Reasons: (i) The travel was made in order to carry on the duties of employment. (ii) Subparagraph 8(1)(h)(iii) denies a deduction where a taxpayer receives an allowance for travel expenses that was, because of subparagraph 6(1)(b)(v), (vi) or (vii), not included in computing the taxpayer's income for the year. However, if employment-related motor vehicle expenses are in excess of the non-taxable motor vehicle allowance and a taxpayer voluntarily includes the allowance in income, the CRA will generally permit the deduction if the requirements in section 8 of the Act are otherwise met. (iii) Generally, travelling between an employee's home and the place where he or she regularly reports for work is considered personal travel. However, where an employee proceeds directly between their home and a location other than their regular place of work, it may be considered employment related travel. It is a question of fact as to whether a particular location is an employee's regular place of work.

								2005-015240
XXXXXXXXXX 							Rob Ferrari
(613) 957-2138
February 9, 2006

Dear XXXXXXXXXX:

Re: Employee Motor Vehicle Expenses

This is in reply to your letter of September 21, 2005 and your e-mails of January 12, 2006 and January 31, 2006 with respect to the above noted matter.

You indicate that you are an employee of a school division working under one employment contract and your duties include teaching and consulting work, each of which represent approximately 50% of your time. In the morning you drive from your home to teach at a school. At midday, you drive from the school to either your employer provided consulting office or to various other locations during the course of the workday in the performance of your consulting duties. These other locations include 6 high schools that you routinely visit and various other facilities. Your employer does not pay a motor vehicle allowance for travel to and from your home, nor for travel from the school to any of the other work locations. However, you are paid a per-kilometre allowance that is not included in your employment income for travelling between the other various work locations during the course of a workday.

You have asked if you were to receive an additional per-kilometre allowance for travelling from the school to your other work locations, would such an allowance be included in your income as a taxable benefit? In the alternative, you ask whether you may claim a deduction for motor vehicle expenses for employment related travel for which you do not receive an allowance.

Our Comments

Our comments represent our general views with respect to the above noted subject matter. As indicated in paragraph 22 of Information Circular 70-6R5, our comments do not constitute an income tax ruling and accordingly are not binding on the Canada Revenue Agency. Additionally, our comments represent our general views solely with respect to the application of the provisions of the Income Tax Act (the "Act"). No comments expressed in this letter should be construed as implying an opinion as to whether you are entitled to motor vehicle allowances under the terms of your employment contract.

Subparagraph 6(1)(b)(vii.1) of the Act provides, subject to certain conditions, that 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 may be excluded from employment income. Based upon the information you have provided, your travel from the school to your other work locations during the course of the workday appears to have been made in the performance of the duties of your employment. Therefore, if your employer were to pay you an additional per-kilometre allowance for that travel, it would be non-taxable so long as the allowance was reasonable.

You have received a non-taxable allowance for only certain employment travel and you have asked whether you may claim a deduction for motor vehicle expenses in respect of other employment related travel for which you have not received an allowance. Paragraph 8(1)(h.1) of the Act provides, subject to certain conditions, for a deduction of motor vehicle expenses where an employee "was ordinarily be required to carry on the duties of the office or employment away from the employer's place of business or in different places." Subparagraph 8(1)(h)(iii) of the Act denies such a deduction 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. However, if you can demonstrate your total employment-related motor vehicle expenses are in excess of your motor vehicle allowance and you voluntarily include that allowance in your income, the CRA will generally permit the deduction for the total employment related motor vehicle expenses if the requirements in section 8 of the Act are otherwise met.

Employment related expenses for the purposes of section 8 does not include expenses in respect of travel between an employee's home and a regular place of employment. Any location at or from which an employee regularly reports for work or performs the duties of employment, is considered a regular place of employment and as such, an employee could have more than one regular place of employment. From the information you have provided, the school at which you teach, the consulting office and the 6 high schools to which you regularly travel would be considered your regular place of work and travel between your home and these locations would be considered personal travel. With respect to the various remaining locations to which you travel, some of these locations may not be your regular place of work and as such, your travel between your home and some of these locations may potentially be considered employment related travel. However, a review of all of the circumstances surrounding your travel to each of these locations would be required before an opinion could be expressed.

Finally, we would bring to your attention that subsection 8(10) of the Act requires that employees must obtain form T2200 Declaration of Conditions of Employment signed by their employer certifying that the employee is required to pay his or her own expenses in order to obtain a deduction under paragraph 8(1)(h.1) of the Act.

We trust the above comments will be of assistance to you.

Yours truly,

Randy Hewlett
Manager
Business and Individual Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch