6 April 1993 External T.I. 9302385 F - Purchase of Computers by Employees -CCA

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.

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Attention:  XXXXXXXXXX

Dear Sirs:

RE:  Expenses Incurred by Employees

We are replying to your facsimile transmission of January 25, 1993, concerning the costs incurred by employees in performing the duties of employment and in particular, the costs incurred in the purchase of a computer.

You are concerned with two situations. In the first, employees are able to access the employer's main computer from a remote location through the use of a personal computer. You have found that this access is convenient and cost effective for both the employer and the employee since it allows the employee's time to be utilized in solving problems rather than travelling to and from the office. The employer presently provides the necessary equipment to gain this access but is now considering asking the employee to provide the personal computer while the employer will continue to provide the modem and communications. software. You have asked if there are any tax incentives or deductions available to the employee where the employee purchases the computer and uses it in the circumstances described above.

Employees wishing to claim a deduction from employment income are restricted to those expenses specifically set out in section 8 of the Income Tax Act. Generally speaking, capital cost allowance is not permitted as a deduction for employees except in respect of an aircraft or a motor vehicle which the employee is required to provide in order to carry out the duties of employment. As for other expenses that the employee may claim, please refer to the comments in chapter 2 of the attached "Employment Expense Guide" for details on what types of expenses may be allowable in the appropriate circumstances. Please note that a deduction for "work space in the home" as described on page 9 will only be allowable if the employee also meets the criteria necessary for "office rent" as described on the same page.

In your second situation, you ask about the implications relating to the use of the employee's equipment on the employer's premises. In such a situation, the employer would pay monthly fees to the employee for the use of the equipment and the employee would be responsible for providing the equipment and liability insurance relating to its use.

The tax implications of this scenario involve a finding of fact with respect to the transactions between the employer and the employee. It must first be determined if the additional amount paid by the employer represents a rental charge for the equipment or additional remuneration. Factors which may be considered in making such a determination would include consideration of the fair rental value of such equipment and whether the employer is restricted in the manner in which the equipment is used (i.e is it only available for use by the employee who has provided the equipment).

Where the monthly amount paid for the use of the equipment is not considered as remuneration, the employee would be required to include the amount in income, net of any applicable expenses including capital cost allowance. Note however that should expenses exceed the amount paid by the employer for the use of the equipment, the employee would not be entitled to deduct such an excess from other income unless the employee could establish that there was reasonable expectation of profit on the rental of the equipment to the employer.

Provided that the amount is not considered remuneration, there is no authorized form required of the employer to show the amount of rent paid to the employee for the equipment. Nevertheless, the employee is required to keep books and records and supporting documentation in support of the statement of income and expenses which is filed with the employee's tax return.

We trust our comments will be of assistance to you.

Yours truly,

J.A. Szeszycki for Director Business and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch