Principal Issues: How the employer should complete the answers to Question 10 on Form T2200 in the case where an employee has the option to work from home and that time is not tracked by the employer?
Position: See response.
Reasons: See response.
Question 3(b)(i): Completing Form T2200, Declaration of Conditions of Employment
Because working from home will continue and the agreement between the employee and employer will vary in respect of the exact amount of time an employee will work in the office and at home, practically it will be difficult for employers to determine the exact percentage of time a particular employee works from home. Subsection 8(13) sets out the rule requiring an employee to perform their duties “principally” from home to claim office expenses, so it is submitted that the employee is responsible to meet this legislative requirement. Can the CRA provide some guidance on how the employer should complete the answers to Question 10 on Form T2200 in the case where an employee has the option to work from home and that time is not tracked by the employer?
CRA Response
Generally, a salaried employee may deduct home office expenses under subparagraph 8(1)(i)(iii) of the Income Tax Act (“Act”) if the conditions in that subparagraph, and those in subsections 8(10) and (13) of the Act are satisfied.
Subparagraph 8(1)(i)(iii) of the Act allows for the deduction of work-space-in-the-home expenses (i.e., supplies consumed directly in the performance of the duties of employment), where an employee was required by contract of employment to supply and pay for those expenses, the expenses are reasonable, and the employee was not provided a reimbursement by their employer for these expenses.
It is the general position of the Canada Revenue Agency that when an employee and employer have entered into a formal work arrangement, the employee is “required by contract of employment” to provide a work space in their home and pay for some additional costs associated with providing this work space. While the actual agreement can take many different forms (for example, a verbal agreement, an e-mail from the employer confirming the agreement, or a formal written agreement initiated by either the employee or the employer), what is critical is that the details of the work arrangement are agreed to and clearly understood by both the employee and the employer.
Subparagraph 8(13)(a)(i) of the Act provides that expenses which are otherwise deductible under subparagraph 8(1)(i)(iii) of the Act cannot be deducted as work-space-in-the-home expenses unless the work space is the place where the employee principally (i.e., more than 50%) performs their duties of employment.
Where the conditions in subparagraph 8(1)(i)(iii) of the Act are met by an employee, subsection 8(10) of the Act further requires that Form T2200, Declaration of Conditions of Employment, be completed and signed by their employer to certify the conditions of employment. However, a signed Form T2200 does not provide an employee with any assurance that the expenses incurred are deductible, since the Act contains other criteria that the employee must satisfy.
With regard to the completion of Form T2200, Question 10 asks that an employer approximate the percentage of the employee’s duties of employment that were performed at a work space in their home. An employer is not asked to certify whether this work space was the place where the employee principally (i.e., more than 50%) performed their duties of employment.
As the nature of work arrangements and the manner in which they are documented will differ by employer, an employer should use the method which best aligns with their practices and procedures to collect the information needed to respond to Question 10 on Form T2200.
Tom Baltkois
2021-091435
November 19, 2021