Principal Issues: [TaxInterpretations translation] Does subparagraph 6(6)(b)(i) of the Income Tax Act apply where an allowance is paid to an employee to travel from the employee's principal place of residence to the employer's place of business for a stopover and then to a special work site, assuming that all other conditions listed in subparagraph 6(6)(a)(i) are satisfied?
Position: Question of fact, but probably yes.
Reasons: The Income Tax Act.
XXXXXXXXXX
2009-035281
Lucie Allaire, Advocate,
CGA, D. Fisc.
June 1, 2010
Dear Madam,
Subject: Travel allowance - special work site
This is in response to your letter dated December 21, 2009, in which you requested our opinion on the tax treatment of allowances paid to employees for travel between their principal place of residence and the employer's place of business in light of additional information provided in a telephone exchange (XXXXXXXX/Allaire).
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
You referred to a company that performs work at special work sites as defined in subparagraph 6(6)(a)(i) and pays for board and lodging for employees at that work site. In your opinion, the value of the expenses or the reasonable allowance for board and lodging at the work site is not taxable in computing the employees' income under subparagraph 6(6)(a)(i).
At the employer's request, employees must travel to the employer's establishment by their own means and then travel to special work sites using the employer's trucks. In order to do so, some employees (the "Responsible Employees") offer a carpooling service to their co-workers who live in the same community.
The employer pays an allowance, which you consider reasonable, to Responsible Employees who use their personal vehicle for travel between their principal place of residence and the employer's place of business. You indicated that the employees do not perform any work at the employer's place of business, except for possible planning meetings.
You specified that the employer's place of business is located on the route between the employees' main places of residence and the special work sites. It would appear that the distance between the employees' principal place of residence and the special work site is such that it is unreasonable to expect them to commute between the two locations on a daily basis.
Your Question
You are asking whether travel allowances that you consider reasonable and that are paid to Responsible Employees in this situation meet the requirements of subparagraph 6(6)(b)(i) for not being included in computing their income.
Our Comments
It appears to us that the situation described in your letter and summarized below could constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the practice of this Directorate to provide comments on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documentation to the appropriate Tax Services Office for its opinion. However, we can offer the following general comments that may be helpful.
Paragraph 6(6)(b) generally excludes in computing a taxpayer's income any amount received or enjoyed by the taxpayer in respect of, in the course of or by virtue of the office or employment that is the value of, or an allowance (not in excess of a reasonable amount) in respect of expenses the taxpayer has incurred for transportation between the taxpayer's principal place of residence and a special work site in respect of a period of time during which the taxpayer received an amount described in paragraph 6(6)(a).
Before it can be concluded that travel allowances paid by the employer to Responsible Employees in the present situation fall within the exemption in subparagraph 6(6)(b)(i), the following conditions must all be satisfied:
- the duties performed by the Responsible Employees must have been carried out at a special work site and been of a temporary nature;
- The Responsible Employees maintained at another location a self-contained domestic establishment as their principal place of residence:
- that was, throughout the period, available for their occupancy and not rented by them to any other person,
- to which, by reason of distance, the Responsible Employees could not reasonably be expected to have returned daily from the special work site;
- board and lodging provided by the employer or reasonable allowances related to it are for a period of at least 36 hours, which may include time spent travelling between the principal place of residence of the Responsible Employees and the special work site.
The application of the rules by virtue of subsection 6(6) remains a question of fact that can only be determined after consideration of all the facts and circumstances of a particular situation. Consequently, if all the conditions listed above are satisfied, considering the reasonableness of the allowances paid to Responsible Employees, we are of the view that such allowances could be excluded in computing their income by virtue of subparagraph 6(6)(b)(i).
As you know, to facilitate the process of claiming the subsection 6(6) exemption, the employee must complete Form TD4, Declaration of Exemption - Employment at a Special Work Site, which must be certified by his or her employer.
Best regards,
François Bordeleau, Advocate
Manager
Business and Partnerships Section
Income Tax Rulings Directorate.