Nov 21 1988
Small Business and General Division R.B. Day 957-2136
SUBJECT: Paragraph 8(1)(f) Your File No: HAV 4533-12
We are writing in reply to your memorandum of October 28, 1988, wherein you requested our views as to whether or not the employer's portion of a CCP/UIC deduction paid for by an employee would be deductible by the employee under paragraph 8(1)(f).
Our understanding of the facts in this case is as follows:
XXXX
The reasons for Office Examination not allowing a deduction under 8(1)(f) are as follows:
(a) In section 8, among the deductions available to the taxpayer from an employment are the amounts payable to a employee for the employee's portion of CCP/UIC and the employer's portion thereof only where the employee is also an employer himself.
(b) The UIC Act unequivocally states that "Notwithstanding any contract to the contrary, an employer is not entitled to recover from an insured person the employer's premium payable by the employer either by withholding the amount thereof from the wages of such a person or otherwise".
The reasons in 7 above are, in your view, important because Source Deductions is of the opinion that by calling the employer portion a fee, the wording will allow the Department to permit a deduction under 8(1)(f). You can understand that payment of a contractual "fee" would be legally binding on an agent. However, the Department is not obliged to accept that such a "fee" would, therefore, qualify as a deduction under paragraph 8(1)(f) when the description of the method of calculating the amount identifies the "fee" as the employer's portion.
Comment and Observations
It is our opinion that since the amounts are required to be paid by the employee to the employer pursuant to clause 4(b) of the "Salesman's Contract", it is our opinion that this expense would constitute "amounts expended by him in the year for the purpose of earning the income from employment ..." as permitted by paragraph 8(1)(f) and should not be treated differently from the other fees required to be paid under clause 4 of the Contract.
Where the employer is concerned, the amounts received on account of CPP/UIC from the employee would, presumably, be included in the employer's income and will, in fact, offset the amount remitted by the employer on account of CPP/UIC. Since someone (either the employer or the employee) should be entitled to deduct the amount remitted on account of CCP/UIC in computing income we see no reason, in fact or law, to deny this deduction to the taxpayer.
The above opinion runs contrary to a previous opinion given by this Division to the Edmonton District Office on March 10, 1986, in similar circumstances (copy attached). In the Edmonton situation we were not provided with a copy of the employment contract. Accordingly, we had no evidence that the taxpayer in that situation was under a contractual obligation to make the payments. Had we been in possession of such a contract, our opinion would, in all probability, have been in line with our views in this particular situation.
ORIGINAL SIGNED BY
B.W. Dath Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch