Principal Issues: [TaxInterpretations translation] Are travel expenses incurred by a radiologist in traveling to Hospitals A and B in the course of his regular work and those incurred when he is on call deductible in calculating his income?
Position: No.
Reasons: According to paragraph 24 of IT-521R, travel expenses incurred between home and a place of business cannot be deducted unless the home is a principal place of business.
XXXXXXXXXX 2004-005542
N. Deslandes, CGA
September 24, 2004
Dear Sir,
Subject: Travel expenses
This is in response to your letter of December 19, 2003 in which you requested our opinion on the above subject. We apologize for the delay in responding to your request.
You presented us with the situation of a radiologist who incurs travel costs because he practises in two hospitals. You added the following facts:
1. The radiologist has a self-employed status.
2. He lives at a distance of 80 kilometres from Hospital A and 75 kilometres from Hospital B.
3. The radiologist does not have a permanent office at Hospital A but an office and an X-ray room are available to him when he comes to work there.
4. Hospital B, on the other hand, provides him with an office for his exclusive use and an X-ray room is made available to him.
5. The radiologist has a regular work schedule at both hospitals and is periodically on call in the event of an emergency (which may be evenings, nights or weekends).
6. When the radiologist is on call, he must be available within a maximum of 20 minutes. To meet this requirement, he rents a hotel room or apartment near the hospital for which he is on call.
Your Question:
Are travel expenses incurred by the radiologist in going to Hospitals A and B in the course of his regular work and those incurred when he is on call deductible in computing his income?
Our Comments:
As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is the practice of our Directorate 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 which may not apply in full to the situation you have submitted.
Paragraph 18(1)(a) of the Income Tax Act (the "Act") denies the deduction of an outlay or expense except to the extent that it was made or incurred by the taxpayer for the purpose of gaining or producing income from the business or property. In addition, paragraph 18(1)(h) explicitly disallows the deduction of personal or living expenses of the taxpayer, other than travel expenses “incurred by the taxpayer while away from home in the course of carrying on the taxpayer’s business”.
Whether travel expenses constitute personal expenses to a taxpayer or expenses incurred or made for the purpose of earning business income while away from home is a question of fact that can only be resolved after consideration of all the facts relevant to a particular situation.
As stated in paragraph 24 of Interpretation Bulletin IT-521R, Motor Vehicle Expenses Claimed by Self-Employed Individuals, the personal use of an automobile generally includes travel between a person's home and place of business unless it can be shown that the taxpayer's principal place of business is the taxpayer’s home. In the situation you have presented, there is no evidence that the radiologist's home is his principal place of business.
A taxpayer's place of business may include one or more places where any activity takes place for the performance of the taxpayer's services as well as its legal, administrative or management activities. In our view, it is not necessary for the taxpayer to own such facilities or for them to be personally assigned to the taxpayer in order for a place to be considered the taxpayer's place of business. In fact, in some cases, such as that of health professionals, it may be sufficient for an individual to have access to certain premises on a continuous basis to carry on the individual’s business and for it to be common knowledge that the individual can be reached at such location when the individual’s services are required, in order to conclude that it is the individual’s place of business.
In our view, Hospital B should be considered a place of business for the radiologist. We have assumed that since the radiologist has an office there, he must necessarily travel there regularly and that it is there that the individual can be reached when his services are required. Consequently, travel between home and Hospital B is personal in nature and is not deductible by virtue of subsection 18(1)(h). This position applies even if the travel between the individual's home and Hospital B takes place while the individual is on call in the evening, at night or on weekends.
With regard to travel between the home and Hospital A, we cannot conclude so categorically. Indeed, whether a hospital is a place of business for a radiologist is a question of fact that can only be resolved after examining all the facts surrounding the situation described. The fact that a radiologist does not have a permanent work office at that hospital may serve as an indication but is not, in our view, a conclusive criterion in itself. The other criteria set out above should also be considered. For example, in the situation stated, one could conclude that Hospital A is a place of business for the radiologist since you indicated that the radiologist has a regular work schedule at both hospitals. In such a case, travel between his residence and his place of business would be considered to be of a personal nature. Consequently, they would not be deductible by virtue of paragraph 18(1)(h). The above reasoning applies even if the travel is incurred because he is on call.
As for hotel or apartment expenses incurred in order to be near the hospital when the radiologist is on call, they are usually considered personal expenses and not deductible under paragraphs 18(1)(a) and 18(1)(h). However, the latter paragraph includes an exception for travel expenses incurred by a taxpayer in the course of carrying on business while away from home. Whether the radiologist falls within this exception is a question of fact that we cannot answer based on the information you have provided.
These comments are not advance income tax rulings and do not bind the CRA with respect to any particular factual situation.
We hope that these comments are of assistance.
Best regards,
Ghislaine Landry, CGA
Manager
Individuals, Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate