Principal Issues: [TaxInterpretations translation]
Representatives receive an allowance from their employer for the use of their motor vehicle. These representatives do not have a place to work at the employer's premises and must have an office at home. They meet several clients a day at the client's place of business. Is the distance travelled by the sales representatives when they leave their home in the morning to go to their clients' first place of business and when they leave their clients' last place of business and return to their home at the end of the day in the performance of the duties of their employment for the purposes of paragraph 6(1)(b) of the Act?
Position:
Question of fact.
Reasons:
The CRA's long-standing position, supported by the courts, is that the distance an employee travels between the individual's residence and regular place of work is not a distance travelled in the course of performing the duties of the office or employment. However, if an employer requires an employee to travel from the individual's residence to a client's place of business in the course of employment, the distance travelled for that purpose would not be considered personal.
XXXXXXXXXX Danielle Bouffard
2004-006021
June 22, 2004
Dear Madam,
Subject: Motor Vehicle Allowance
Personal use or use for employment purposes
This is in response to your fax of February 3, 2004, in which you asked whether travel by taxpayers in the hypothetical situation described below is in the performance of the duties of their office or employment. We apologize for the delay in responding to your request.
A broker firm (the “employer") employs representatives whose task is to promote the products of the manufacturers it represents. The employer has only one place of business and its activities extend throughout the province. The representatives meet daily with various customers within their territory, and with between 15 and 45 on a weekly basis. Their work, most of which is done at the customer's premises, consists of market research, taking orders and meeting with the heads of the various departments. The representatives do not have a place of employment with the employer and are under no obligation to report to the employer. The employer requires the representatives to maintain an office at their residence to be used for administrative work. From their office, representatives have remote access to the employer's computer system. Representatives are not paid by commission.
The employer pays the representatives an allowance for the use of a motor vehicle. The allowance is based on the actual mileage driven by the representatives. Representatives leave their home in the morning to go directly to their first client and at the end of the day they leave the last client to return to their home.
Question
Is the distance travelled by representatives, from when they leave their residence in the morning to go to the first client place of business to when they leave the last client place of business to return to their residence at the end of the day, in the course of performing the duties of their employment for the purposes of paragraph 6(1)(b)?
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is the practice of the Canada Revenue Agency (the "CRA") not to issue a written opinion regarding proposed transactions otherwise than by 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 as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you. These comments may not, however, apply to your particular situation in certain circumstances.
Subparagraphs 6(1)(b)(v) and (vii.1) of the Income Tax Act (the "Act"), subject to the limitations of subparagraphs 6(1)(b)(x) and (x.1), exclude reasonable travel and motor vehicle allowances received by an employee from the employee’s employer for travel in the course of the employee’s office or employment.
As you have indicated, it has been the longstanding position of the CRA that the distance an employee travels between the employee’s residence and a regular place of work is not a distance the employee travels in the course of performing the duties of the employee’s office or employment, even in situations where the employee has an office in the employee’s residence that is also a regular place of work. An employee may have more than one regular work location. The fact that an employee has one work location to which the employee reports more frequently than others does not affect the status of the other work locations as a regular work location.
However, as stated in paragraph 5 of Interpretation Bulletin IT-63R5, where (as required by the employer or with the employer's permission) the employee proceeds directly from home to a point of call other than the employer's place of business to which the employee reports regularly, or returns home from such a point, the travel is not considered to be for personal use. In addition, the distance an employee travels, at the request of the employer, from one client's place of business to another is a distance that the employee travels in the performance of the duties of the employee’s or employment.
The determination of a location as a place of work for an employee and how regularly the employee is at that location remains a question of fact. For example, a client's place of business may constitute a regular place of work for the representative depending on the frequency and duration of the representative's visits on a daily or weekly basis such that the distance travelled between the representative's residence and such regular place of work would not be in the performance of the duties of the office or employment. The same would be true if a representative is required to attend meetings or make other trips to the employer's place of business on a regular basis. The distance the representative travels between the representative’s residence and the employer's place of business would be considered to be for personal use.
In the situation you have presented, it appears that the trips made by the representative with his motor vehicle to go from the employee’s residence to the first client place of business and from the last client place of business to the individual’s residence could be considered to be trips made in the performance of the duties of his office or employment, as long as such client places of business do not constitute a regular place of work to the individual. Based on the facts presented in the hypothetical situation, it is unlikely that the clients' places of business would constitute a regular place of work of the representative.
These comments are not advance income tax rulings and do not bind the CRA with respect to any particular factual situation.
Best regards,
Ghislaine Landry, CGA
for the Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch