8 May 2001 Internal T.I. 2001-0081707 - XXXXXXXXXX . QUESTIONS

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: (1) Whether overpayment made to employee in error should be included on employee's T4 slip. (2) Whether employees of a placement agency who work as drivers for a trucking company can claim expenses for meals and lodging under paragraph 8(1)(g) of the Act.

Position: (1) Probably not. (2) No amount may be claimed under this provision

Reasons: (1) If overpayment arose due to honest error, and employee is required to repay the overpayment, then it is not salary or wages, even if the amount is not repaid by the employee in the year. (2) Principal business of employer must be the transportation of goods, equipment or passengers. This is not the principal business of the placement agency. Consistent with other opinions.

		May 8, 2001

	Lorraine Maisonneuve	HEADQUARTERS
	Policy and Technical Services Section	Wayne Antle, CGA
	Trust Accounts Division	(613) 957-2102
	Revenue Collections Directorate
		2001-008170

Questions Received From XXXXXXXXXX

This is further to your emails received on April 25, 2001, concerning two issues raised by the XXXXXXXXXX that they wish to have addressed in your round table discussion planned for May 24, 2001. The issues are as follows:

Overpayments made to Employees in Error

The first question concerns what amounts should be included on an employee's T4 slip where he or she has been overpaid in error, and has not repaid the overpayment to the employer.

Our long-standing position is that where an employer makes an overpayment to an employee due to a calculation error, and this overpayment is required to be repaid, the amount paid in error is not considered as salary or wages of the officer or employee receiving it, nor is it an advance to him or her. Therefore, it is not included in the employee's income for the year of receipt and, in the event that he or she is required to repay it in the same or another year, no deduction from income is allowable with respect to the repayments made.

It is a question of fact whether an amount was paid to an employee in error, and whether the employee is required to repay the overpayment. This can only be determined after reviewing all of the facts and documentation including the circumstances surrounding the overpayment, the employment contract, and the applicable labour law. In our view, if the overpayment was made due to an honest error, and the employee is required to repay the amount, then the overpayment would not be considered salary or wages and would not be included in employment income, even though the employee did not repay the overpayment in the year.

Transport Employees' Expenses (Form TL2)

The second question concerns the completion of the TL2 form by a placement agency that enters into a contract with a trucking company to provide drivers to the trucking company. Neither the trucking company nor the placement agency believes that it can sign Part 3 of this form for the employees of the placement agency.

The TL2 form is completed by transport employees who are claiming expenses for meals and lodging under paragraph 8(1)(g) of the Income Tax Act (the "Act"). This provision is restricted in its application to an individual who is an employee of a person whose principal business is the transportation of passengers and/or goods. The principal business of a placement agency is not the transportation of passengers and/or goods but rather the supply of human resources to clients in need of temporary manpower assistance.

We have, in the past, been asked to consider whether truck drivers whose duties parallel those driving for transport companies but whose employers' principal business happened to be the manufacture of goods rather than the transportation of goods, would be entitled to a claim under paragraph 8(1)(g) of the Act. Our responses have confirmed that, despite the similarity in the truck drivers' duties, the wording of the provision compels us to consider the principal business of the individual's employer in determining the driver's entitlement to a claim under paragraph 8(1)(g) of the Act. Accordingly, neither the placement agency, nor the trucking company that engaged the services of the placement agency's employees, can sign the employer's certification on Form TL2.

We trust that our comments will be of assistance.

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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