Shurtliff v. R., [1999] 4 CTC 2864 (Informal Procedure)

Bowman T.C.J.:

These appeals are from assessments for the appellants’ 1991 taxation year. Wayne Shurtliff’s appeal involves the inclusion in his income of $5,036.62 received from his employer, Petro Canada, as an incidental moving expense allowance given in connection with his relocation from Taylor, British Columbia to Port Moody, British Columbia.

The appeal of Irene Shurtliff, his spouse, is contingent on the result in Wayne Shurtliff’s appeal. If his income is reduced as the result of his appeal one of the components in the formula under section 122.2 will change, resulting in a higher child tax credit for Irene Shurtliff.

In 1991, the appellant was relocated from the Petro Canada refinery at Taylor, British Columbia to Port Moody, where Petro Canada intended to reopen a refinery. The appellant was reluctant to move but had little choice. He believed that the reopening of the Port Moody refinery was a mistake that would result in a multi-million dollar loss to the company and that it would shortly be closed. As it turned out, he was right. The refinery closed within two years.

Petro Canada paid his moving expenses. Also, it paid him $5,036.62, based on 15% of his salary to cover expenses relating to the move. The allowance was non-accountable, that is to say, no receipts were required and he was free to spend it as he wished. The appellant was given a memorandum by Petro Canada which set out the purpose of the allowance. It reads as follows:

7. Incidental Moving Expense Allowance

The Company provides you with an incidental moving expense allowance equal to 15% of your post-transfer annual salary to cover various expenses that are not specifically provided for by other provisions of the Relocation Program.

This Allowance is intended To Offset Items Such as (But Not Limited to) The Following:

• post office change of address;

• lifting, relaying or alteration of carpets and linoleum;

° new carpets, rugs and linoleum;

• alterations to drapes, including associated hardware and material required to complete alterations;

• new drapes and curtains, and other items of furnishing;

° alterations to furniture;

° storm doors and windows, garden hose, tools;

• adjusting and/or installing radio and TV antennas, cable and telephone;

• deposits of utilities and service;

• painting and decorating;

• personal club and association memberships;

° registration of motor vehicles and operator’s licences;

• hudac fee and water meter installation;

• house inspections, engineering studies, etc.;

• vaccination of pets;

• additional in-transit insurance requirements;

° cleaning services at former and/or new residence(s);

• pet kennels and interim lodging/boarding due to some hotel-motel regulations;

• pet travel carriers, sedation and veterinary costs;

• babysitting, alcohol, entertainment and dry-cleaning costs while house hunting or in temporary accommodation;

° connection and disconnection of telephone, and cable services;

• costs associated with extermination or fumigation;

• dissembling and assembling water beds and garden and patio furniture, pool tables, storage cabanas, swing sets, play houses, swimming pool and other speciality services;

• removal and installation of valence boxes, curtain rods, wall hooks. clocks, and wall mirrors:

° costs of altering locks;

• non-cancellation of fees such as insurance and local clubs and associations;

° tuning pianos;

• photocopy or transmittal costs for transcripts of academic records for employee, spouse and children;

• long distance telephone calls related to purchase or sale of home while in temporary accommodation;

° gasoline costs while in temporary accommodation;

• exclusive use of van and transportation of abnormal household items such as lumber, building products, firewood, trees, livestock, farm equipment, equipment for special use in a non-Petro-Canada business enterprise, or other abnormal items of substantial weight not normally part of a household move;

• extra pickup and delivery charges; and

* charges associated with special transport treatment of household plants, frozen goods and pets.

This allowance is taxable and income tax will be withheld from the payment. However, some of the above items may be allowed as a legitimate moving expense by Revenue Canada. You should contact your local Revenue Canada office and obtain Form Tl-M and discuss your moving expenses with their officials. You may not claim expenses which have been specifically reimbursed by the company in other sections of the moving policy.

In addition, the “Request for Incidental Moving Allowance” form, found in the Forms section, describes a $500 tax exemption for which receipts are not required.

The amount was paid to the appellant in 1991, less an amount that was withheld as tax. In filing his return the appellant deducted the amount of $5,036.62 and received a refund of tax in the initial assessment. Subsequently, the Minister of National Revenue reassessed and included the amount of allowance in Mr. Shurtliff’s income.

Mr. Shurtliff contends that the move to Port Moody entailed a considerable loss to him. For example, the refinery closed in two years and he was obliged to come back to Taylor and find work with his present employer.

I accept that he suffered a financial disadvantage as a result of the move. I do not think that it can be said, however, that the allowance was a reimbursement of a specific loss.

Paragraph 6(1)(b) requires the inclusion in income of:

all amounts received by him in the year as an allowance for personal or living expenses or as allowance for any other purpose, except

(inapplicable)

It is clear that the amounts were paid to him qua employee, by his employer and by reason of his employment. Moreover, they were not a reimbursement of expenses.

In Ransom v. Minister of National Revenue (1967), [1968] 1 Ex. C.R. 293 (Can. Ex. Ct.) Noël J. said:

51 In a case such as here, where the employee is subject to being moved from one place to another, any amount by which he is out of pocket by reason of such a move is in exactly the same category as ordinary travelling expenses. His financial position is adversely affected by reason of that particular facet of his employment relationship. When his employer reimburses him for any such loss, it cannot be regarded as remuneration, for if that were all that he received under his employment arrangement, he would not have received any amount for his services. Economically, all that he would have received would be the amount that he was out of pocket by reason of the employment.

52 An allowance is quite a different thing from reimbursement. It is, as already mentioned, an arbitrary amount usually paid in lieu of reimbursement. It is paid to the employee to use as he wishes without being required to account for its expenditure. For that reason it is possible to use it as a concealed increase in remuneration and that is why, I assume, “allowances” are taxed as though they were remuneration.

53 It appears to me quite clear that reimbursement of an employee by an employer for expenses or losses incurred by reason of the employment (which as stated by Lord MacNaughton in Tennant v. Smith, [1892] A.C. 162, puts nothing in the pocket but merely saves the pocket) is neither remuneration as such or a benefit “of any kind whatsoever” so it does not fall within the introductory words of Section 5(1) or within paragraph (a). It is equally obvious that it is not an allowance within paragraph (b) for the reasons that 1 have already given.

This case is virtually on all fours with McGuire v. R., [1999] 2 C.T.C. 2914 (T.C.C.), where Hamlyn J. held that a similar moving allowance made to an RCMP officer was taxable following the Federal Court of Appeal decision in Phillips v. Minister of National Revenue, (1994), 94 D.T.C. 6177 (Fed. C.A.). See also Canada (Attorney General) v. MacDonald, [1994] 2 C.T.C. 48 (Fed. C.A.).

While I recognize that moving to Port Moody involved a financial disadvantage to the appellant, I do not think that in the present state of the law I can conclude that the allowance is not taxable.

The appeals are therefore dismissed.

Appeals dismissed.