Principal Issues: Was the T2200 form completed correctly? Was the employee entitled to a deduction for travel expenses?
Position: It is possible that the Form T2200 may not have been completed properly. However, it remains a question of fact as to whether any deduction should be allowed and as such only general comments have been provided. However, travel expenses or motor vehicle expenses incurred in connection with travel from the employee's 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) or (h.1).
Reasons: The law.
XXXXXXXXXX 2007-024518 Michael Cooke April 2, 2008
Dear XXXXXXXXXX :
Re: Travel Expenses - T2200
This is in reply to your letter of October 23, 2007 in which you requested our comments concerning the completion of Form T2200, "Declaration of Conditions of Employment" ("T2200") by your employer.
You indicate in your letter that you are a unionized apprentice carpenter and are required to travel to various job sites. You also indicate that if you are required to travel to a specific job site that is outside a certain (unspecified) distance, your employer pays you a travel amount, which is included on your T4 slip as employment income for the particular taxation year in question. We have assumed that this travel amount represents vehicle expenses.
In completing the T2200 for the particular taxation year, you indicate that your employer answered "no" to Question 1 and "yes" to Question 5. You ask whether the employer completed the T2200 properly.
Our Comments
Questions concerning the specific income tax consequences related to your personal T1 income tax return for a prior taxation year must be made to your local Canada Revenue Agency Tax Services Office ("TSO"). Notwithstanding this, we are prepared to provide the following comments.
If an employer pays a personal expense of an employee, or provides an allowance for a personal expense, this payment will constitute a taxable benefit, the value of which must be included on the employee's T4 slip. However, there is an exception to this rule for allowances that might be considered to cover personal expenses provided the allowance meets the specific conditions set out in section 6 of the Income Tax Act, (the "Act"). An employer can pay an employee a non-taxable allowance for motor vehicle expenses incurred in the course of performing employment duties provided the allowance is reasonable. Whether an allowance is reasonable is a question of fact. If an allowance is not reasonable or relates to personal travel, it is included in the employee's income.
Similarly, where an employee incurs expenses in the course of performing employment duties, a deduction is available for certain such expenses provided the particular expense is specifically identified in section 8 of the Act. One of the conditions that must be met in order to claim such a deduction is that the T2200 be completed by the employer.
For example, under paragraph 8(1)(h.1) of the Act, in order for an employee to be entitled to a deduction for motor vehicle expenses incurred for employment-related travel, the particular employee must be ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places. Additionally, the particular employee must be required to pay the motor vehicle expenses and he or she must not have received a tax-free allowance for the use of the motor vehicle. As noted above, the claim must be supported by a T2200 signed by the employer and certifying that the aforementioned conditions have been met.
As described in Paragraph 32(c) of IT-522R - "Vehicle, Travel and Sales Expenses of Employees", an employer's place of business generally is considered to have reference to a permanent establishment of the employer such as an office, factory, warehouse, branch or store, or to a field office at a large construction job [emphasis added]. Further, although motor vehicle expenses incurred for driving from home to one's regular place of employment are considered personal and therefore not deductible, a recent decision of the Federal Court of Appeal (Dionne v. The Queen, 2006 DTC 6146) may or may not apply to your fact situation.
In Dionne, the taxpayer was a unionized licensed millwright who worked for different employers at different construction sites at various times in the particular tax year. The particular employee typically reported for work at a particular construction job site located away from the municipality where the taxpayer ordinarily resided and where the employer ordinarily maintained a regular office or permanent establishment. The taxpayer received taxable amounts from the particular employer in respect of such travel and the taxpayer attempted to deduct expenses incurred by him in respect of such travel.
The court in Dionne found that the particular employee was ordinarily required to carry on the duties of employment away from the employer's place of business since it did not consider any of the particular temporary construction sites to be a field office of the particular employer in question (i.e. none of the particular employers in question maintained a regular office or permanent establishment at the particular temporary construction site). While not specifically stated, this appears to be because in each case the particular employer in question only maintained very limited facilities at the particular temporary construction site (such as a small construction trailer with no telephone or other office equipment). As such, where it can be factually established that an employee is rendering service at a temporary construction site that does not constitute a field office of the particular employer, it is our view that such a site will not be considered as the employer's place of business for the purposes of the deduction described in paragraphs 8(1) (h.1) of the Act.
It remains a question of fact as to whether the amount you received from your employer in respect of a motor vehicle allowance was required to be reported on your T4 as a taxable allowance and included in your income pursuant to section 6 of the Act or whether any travel expenses you incurred should be deductible. Since we do not have access to all the facts of your particular situation, as noted above, such a determination must be made by your local TSO.
However, we can advise that the payment of an allowance for motor vehicle expenses does not preclude an employer from responding "yes" to Question 1 on the T2200. If the employee is required to use his or her own car for the performance of employment duties, then at a very basic level, the employee is required to pay his or her own expenses. Question 4 elicits further information from the employer regarding the payment of an allowance.
We trust the foregoing comments will be of assistance.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch