13 March 1998 External T.I. 9731105 - TRAVEL EXPENSES -CONSTR. EMPL.- DEDUCTIBLE?

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether construction tradesmen ("Employees") can deduct travel expenses under paragraph 8(1)(h) or (h.1) where the Employees travel from their home directly to a job site (the employer does not have site offices or trailers at the job sites), between job sites during the course of the work day and home from a job site at the end of the day. The employer does not reimburse the Employees for automobile expenses and does not provide a non-taxable allowance for motor vehicle expenses

Position TAKEN:

The "place of business" of an employer should be interpreted in relation to the employee such that it may also include each place where the employer is carrying out a contract or contracts. Thus,

(i) Travel expenses incurred in connection with travel from home to a job site and back home from a job site at the end of the day would not qualify for the deduction under paragraph 8(1)(h.1).

(ii) Travel expenses incurred in connection with travel between job sites during the course of the work day would qualify for the deduction under paragraph 8(1)(h.1).

Reasons FOR POSITION TAKEN:

(i) Travel from the Employee's home to a job site and back home from a job site at the end of the day is personal travel (see paragraph 14 of (IT-522R) and would not be "travelling in the performance of the duties of the office or employment".

(ii) Travel between job sites during the course of the work day by an employee in order to carry out a contract or contracts would be "travelling in the performance of the duties of the office or employment" such that the related motor vehicle expenses would qualify for the deduction under paragraph 8(1)(h.1) of the Act.

XXXXXXXXXX 								5-973110
P. Diguer

Attention: XXXXXXXXXX 

March 13, 1998

Dear Sir/Madam

Re: Vehicle Expenses of Employees

This is in reply to your letter dated October 1, 1997 in which you requested direction regarding the issuance of Form T2200 to your construction tradesmen.

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996 (copy enclosed). Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature.

Form T-2200

Form T2200 is the prescribed form which must, pursuant to subsection 8(10) of the Income Tax Act (Canada) (the "Act"), be signed by an employer in order for an employee to claim deductions for travelling expenses (other than motor vehicle expenses) under paragraph 8(1)(h) of the Act or motor vehicle travelling expenses under paragraph 8(1)(h.1) of the Act. Upon signing the form, the employer certifies that certain of the required conditions set out in paragraphs 8(1)(h) and 8(1)(h.1) of the Act are met. Where the required conditions are not met, it would follow that the employer should not complete Form T2200.

Paragraphs 8(1)(h) and 8(1)(h.1) provide for the deduction of reasonable amounts that an employee spends in the year for travelling and in this regard provide that in computing a taxpayer's income for a taxation year from employment there may be deducted the following amounts:

where the taxpayer, in the year:

(i) was ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places, and

(ii) was required under the contract of employment to paythe travel expenses (in the case of paragraph 8(1)(h)) or motor vehicle expenses (in the case of paragraph 8(1)(h.1)) incurred in the performance of the duties of the office or employment amounts expended by the taxpayer in the year in respect of amounts expended for travelling (in the case of paragraph 8(1)(h)) or motor vehicle expenses incurred (in the case of paragraph 8(1)(h.1)) for travelling in the course of the office or employment, except where the taxpayer

(iii) received an allowance for motor vehicle expenses that was, because of paragraph 6(1)(b) (reasonable allowance), not included in computing the taxpayer's income for the year, or

(iv) claims a deduction for the year under paragraph (e), (f) or (g) (railway employee expenses, sales expenses or transport employee) expenses in the case of paragraph 8(1)((h) or under paragraph (f) (sales expenses) in the case of paragraph 8(1)(h.1).

Although the signing of the form T2200 by the employer is a prerequisite in order for an employee to be able to claim a deduction for certain employment expenses, a signed form T2200 does not provide an employee with any assurance that any expenses incurred are deductible since the Act contains other criteria that the employee must satisfy. For example, in the situation you described, it would appear that subsection 8(4) of the Act would prevent the deduction of expenses for meals under paragraph 8(1)(h) of the Act.

Paragraph 8(1)(h)

For meal expenses to be deductible under paragraph 8(1)(h) of the Act, subsection 8(4) of the Act requires that the meal be consumed during a period while the employee was required by the duties of employment to be away, for a period of at least twelve hours, from the municipality where the employer's establishment to which the employee regularly reported for work was located. Employees who are hired at a series of places at which the employer is carrying out a contract or contracts cannot meet this requirement as each such place is considered to be the establishment to which the employee is required to report for work during the time worked there.

Paragraph 8(1)(h.1)

With respect to the deduction for motor vehicle expenses under paragraph 8(1)(h.1) of the Act the expenses must, as indicated above, satisfy all the conditions set out in paragraph 8(1)(h.1) including the two following requirements

i) the employee was ordinarily required to carry on the duties of employment away from the employer's place of business or in different places; and

ii) the motor vehicle expenses were incurred for travelling in the course of the office or employment.

With respect to the first condition the Department, as stated in paragraph 32(c) of the enclosed Interpretation Bulletin IT-522 dated March 29, 1996, considers that the "place of business" of an employer generally is considered to refer to a permanent establishment of the employer such as a field office at a large construction site. Moreover, where the terms of employment with respect to the employee are conditional upon the employer's ability to obtain successive contracts such that the employee may or may not be kept on the payroll when a particular contract is completed the Department considers that the place of business of an employer includes each place where the employer is carrying out a contract or contracts.

With respect to the second condition, the Department, as stated in paragraph 49 of IT-522, considers that an employee (employed on a more-or-less permanent basis) who spends most of his time working at places where the employer is carrying out contracts (each such place being the employer's place of business) would not be "travelling in the performance of the duties of the office or employment" when the employee is travelling from his or her residence to the employer's place of business... ". However, travel between job sites during the course of the work day by an employee in order to carry out a contract or contracts would be "travelling in the performance of the duties of the office or employment".

Conclusion

Where:

i) the worksites are all within a reasonable distance of the employees home such that the employee could reasonably be expected to have returned home daily from the worksite;

ii) the employees are not required to be away for at least 12 hours from the municipality and metropolitan area (if there is one) of the employer where the employees normally report for work; and

iii) in the event that there is no work assignment available for the employee he or she would be instructed not to report for work and would not be remunerated for this time off,

the Department would generally consider that the travel from the employee's home to a job site at the commencement of the work day and back home from a job site at the completion of the work day would not be "travelling in the performance of the duties of the office or employment" such that the related motor vehicle expenses would not qualify for the deduction under paragraph 8(1)(h.1) of the Act. However, travel between job sites during the course of the work day by an employee in order to carry out a contract or contracts would be "travelling in the performance of the duties of the office or employment" such that the related motor vehicle expenses would qualify for the deduction under paragraph 8(1)(h.1) of the Act.

The foregoing represents our general views with respect to the subject matter of your letter. The foregoing opinions are not rulings and in accordance with the guidelines set out in IC 70-6R3 they are not binding on Revenue Canada, Customs, Excise and Taxation.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

Encl.