Principal Issues: [TaxInterpretations translation] 1. Can the relationship between the organization and the workers be considered that of employer-employee?
2. Are allowances of $15 to $20 per day to cover workers' travel expenses (meals and automobile mileage) taxable amounts? Is the use of the organization's automobile by a worker to travel between home and the organization's workplace a taxable amount?
3. Does a T4A have to be issued for the amounts paid?
Position: 1. Question of fact, but in this case it is a volunteer agreement.
2. Allowances of $15 to $20 per day and use of the organization's automobile per worker do not result in taxable amounts.
3. No.
Reasons: 1. Minimal amounts paid as allowances or the sole use of the organization’s car for travel between a worker's home and the organization’s place of work do not constitute wages.
2. Since the allowances or benefit from the use of the car are minimal, they do not represent consideration for services rendered under a contract of service.
3. These are not amounts covered by section 200 of the Income Tax Regulations.
2007-025629 XXXXXXXXXX Lucie Allaire, Advocate, CGA, D. Fisc. March 5, 2008
Dear Madam,
Subject: Benefits to workers of a registered charity
This is in response to your letter of June 1, 2007 asking us about the tax implications of developing a worker expense policy for the XXXXXXXXXX ("the organization"). The organization considers workers to be volunteers and compensates them with certain benefits to cover car travel and meal expenses.
Questions to the Canada Revenue Agency ("CRA"):
You wish the CRA to answer the following key questions:
- whether the CRA considers that an employer-employee relationship exists between the workers and the organization, given that they have an established schedule and are provided with clothing;
- whether allowances of $15 to $20 paid to cover certain meal and car expenses based on mileage are taxable, in cases where a worker provides the organization with two to three hours of work per day or seven hours of work per day;
- whether the amounts are taxable, due to the worker using the organization’s car not only to source food items but also to travel between the worker’s home and the organization’s workplace;
- whether a T4A is to be issued in the situations arising under the previous two points, where the amount paid or the benefit exceeds $500; and
- whether a T4A should be issued where workers donate to the organization an amount equal to the total compensation received by cheque that is greater than $500.
In a telephone conversation on January 21, 2008, you confirmed that the workers do not receive any other form of income from the organization for their services and that the clothing provided is distinctive uniforms.
Our Comments
The situation described in your letter is an actual situation involving taxpayers. As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is our practice not to issue written opinions on proposed transactions otherwise than by way of advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices. However, we can offer the following general comments that we hope may be helpful to you. These comments may, however, under certain circumstances, not apply to your particular situation.
The term volunteer is not defined under the Income Tax Act (the "Act"). In that regard, we must refer to the ordinary meaning of the term. The determination of the true nature of an agreement as to whether it is a contract of employment or a volunteer agreement is essentially a question of fact, which can only be answered after analysis of the circumstances of each case, and which depends on the common intention of the parties. The principles of the Civil Code of Québec guide the determination of whether there is a contract of service based on the three essential elements: work, remuneration, and subordination between the parties.
In the labour market, services usually have a specific cost and a person who would be paid for services according to their fair market value cannot be considered as a volunteer. In other words, the question is whether the total compensation paid by the organization to a worker is comparable to what it costs on the market for equivalent services or whether it is much lower.
In this case, the workers are acting as volunteers as they are not providing services in exchange for a salary or other form of remuneration. Furthermore, the amounts paid to the workers as compensation in the form of benefits are minimal.
It is our view that amounts of $15 to $20 per day paid to volunteers to defray the cost of using a car or meals during volunteer activities, even to travel from home to work, would not be considered employment income if they are the only amounts received by them. However, we would reconsider this conclusion if the compensation paid to a worker increased, since any compensation above a small amount would constitute taxable income. In addition, where a worker uses an automobile owned by the organization, not only for volunteer activities, but also for commuting to and from work, we are also of the view that this benefit does not give rise to tax consequences, provided that the cost of the automobile is reasonable and that it is the only personal use made of it.
In light of the facts submitted, the Agency's administrative practice, which specifies the obligation of a payer to report amounts on a T4A when an amount paid is greater than $500, does not apply to your situation.
These comments are not advance income tax rulings and, as stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, are not binding.
Best regards,
Randy Hewlett
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.