Principal Issues: Whether a supply/substitute teacher can deduct motor vehicle expenses for travel between the home and the school at which the teacher is temporarily assigned to teach.
Position: No.
Reasons: Travel between home and the place of work, being the school at which the supply/substitute teacher has been assigned, is a personal expense and therefore not deductible in computing income from employment.
XXXXXXXXXX 2007-022400 Michael Cooke October 30, 2007
Dear XXXXXXXXXX:
Re: Motor Vehicle Expenses - Paragraph 8(1)(h.1) of the Income Tax Act (the "Act")
This is in reply to your letter dated February 7, 2007, in which you requested our views as to whether travel costs incurred by an occasional teacher ("substitute/supply teacher") are deductible in computing your employment income using form T777-Statement of Employment Expenses and whether the school board (the "employer") should be providing the substitute/supply teacher with Form T2200-Declaration of Conditions of Employment ("T2200").
The Canada Revenue Agency's ("CRA's") general views regarding employee paid travel costs and motor vehicle expenses are contained in Interpretation Bulletin IT-522R Vehicle, Travel and Sales Expenses of Employees ("IT-522R"), a copy of which may viewed at http://www.cra-arc.gc.ca/E/pub/tp/it522r/it522r-e.html. As stated in paragraph 14 of IT-522R, traveling between the employee's home and place of employment is considered to be personal travel and the portion of expenses relating to such travel is not deductible. Moreover, as described in paragraph 31 of IT-522R, motor vehicle expenses are generally only deductible under paragraph 8(1)(h.1) of the Act where all of the following conditions are met:
(i) the employee is ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places;
(ii) under the contract of employment, the employee is required to pay motor vehicle expenses incurred in the performance of the duties of the office or employment;
(iii) the employee is not in receipt of an allowance for motor vehicle expenses that was excluded from income by virtue of paragraph 6(1)(b) of the Act; and
(iv) the employee has not claimed any deduction for the year under paragraph 8(1)(f) of the Act.
For the above purposes, in the CRA's view:
- "ordinarily" means "customarily" or "habitually", rather than "continually", but there should be some degree of regularity in the travel that the employee is required to do;
- "required" means that the travel is necessary to the satisfactory performance of the employee's duties (it does not necessarily imply that the employer must order the employee to travel),
- "place of business" generally is considered to have reference to a permanent establishment of the employer; and
- "in different places" generally refers to the situation where the employer does not have a single or fixed place of business.
In the context of your particular fact situation, the CRA has consistently taken the position that where a substitute/supply teacher is hired by a school board to teach at any one of the schools under its jurisdiction, the employer's place of business is considered to be the particular school at which the particular substitute/supply teacher has been assigned to teach on that particular day. Therefore, where a particular substitute/supply teacher performs his or her employment duties at a particular school within the school board's jurisdiction on a particular day, the requirement that the employee be "ordinarily required to carry on the duties of the office or employment away from the employer's place of business", as described in (i) above, would not be satisfied. As such, any motor vehicle expenses would be considered as personal expenses and not employment related expenses. This is the reason your employer is not able to issue a form T2200.
Although in your situation no deduction is available under paragraph 8(1)(h.1), we note that new subsection 118(10) of the Act provides a non-refundable tax credit called the "Canada Employment Credit". First effective in 2006, the Canada Employment Credit recognizes that many employees often incur various types of work related expenses that may not otherwise be deductible under the Act. It is not necessary to prove a specific employment expense. Rather, the credit is simply calculated as the lesser of: an indexed amount ($1,000 for 2007); or the total of all income from office or employment for the year (not including any deductions from employment income permitted by section 8 of the Act); multiplied by the appropriate percentage for the year. For 2007, the appropriate percentage is 15.5%.
We trust that these comments will be of assistance to you.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch