Principal Issues: Whether the requirement "work of a temporary nature" in subparagraph 6(6)(a)(i) is satisfied in particulars situations?
Position: Generals comments.
Reasons: Question of facts.
XXXXXXXXXX 2016-064486
January 4, 2022
XXXXXXXXXX,
Subject: Special work site – duties of a temporary nature
This letter is in response to your letter dated April 6, 2016, in which you asked whether the condition respecting “duties … of a temporary nature” set out in subparagraph 6(6)(a)(i) of the Income Tax Act (the “Act”) is satisfied in the following situations:
1) where an employee is assigned successively to two projects in the same region;
2) where an employee is assigned successively to two projects in the same city;
3) where an employee is assigned successively to two separate projects at the same place of work;
4) where an employee is assigned to a long-term project at the same location, with scheduled seasonal breaks.
All statutory references in this letter are to provisions of the Act.
Our Comments
This technical interpretation provides general comments about the provisions of the Act and related legislation. It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC70-6R12, Advance Income Tax Rulings and Technical Interpretations.
Paragraph 6(1)(b) provides that all amounts received by the taxpayer in the year as an allowance for personal or living expenses or as an allowance for any other purpose, must be included in computing the taxpayer’s income unless, notably, one of the exceptions listed therein applies. In the context of this request, the exceptions in subparagraphs 6(1)(b)(vii) and (vii.1) are particularly relevant. However, those exceptions do not apply in any of the situations submitted.
In addition, subsection 6(6) provides an additional exception to subsection 6(1) in relation to, among other things, special work sites coming within subparagraph 6(6)(a)(i). Subject to compliance with all the conditions of subsection 6(6), subparagraph 6(6)(a)(i) allows a taxpayer to exclude from their employment income an amount received that represents the value of board and lodging expenses (or an allowance not in excess of a reasonable amount) incurred for a period at a special work site, being a location at which the duties performed by the taxpayer were of a temporary nature.
Determining whether the amounts paid by an employer to one of its employees meet the conditions of subsection 6(6), including the “of a temporary nature” condition, is a question of fact on which we cannot rule in the context of a technical interpretation request. That determination can only be made after reviewing all relevant facts, such as the employment contract, the nature of the work or the nature of the employee’s travel, and the details of the project.
The Canada Revenue Agency’s general position on this matter is set out in Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations (the “Bulletin”), specifically paragraphs 4 to 11.
Regarding the concept of “duties… of a temporary nature,” paragraph 6 of the Bulletin states that, as a general rule, duties will be considered to be of a temporary nature if it can reasonably be expected that they will not provide continuous employment beyond a period of two years. However, employment lasting more than two years without the possibility of extension may, after analysis of all the facts of a given situation, also be considered temporary work.
As a guideline for the determination of the expected duration of employment, the Bulletin states that it must be made on the basis of the facts known at its commencement. In this regard, particular consideration should be given to the following factors:
- the nature of the duties to be performed by the employee (certain types of work are, by their nature, short term engagements, such as repair work or trades which are involved only during a certain phase of a project);
- the overall time estimated for a project, or a particular phase of a project, on which the employee is engaged to perform duties; and
- the agreed period of time for which the employee was engaged according to the employment contract or other terms of the engagement.
If those factors change after the start of employment, it may be necessary to reassess whether the work the employee is performing is considered temporary for the purposes of the exclusion relating to employment at a special work site.
For the purposes of subsection 6(6), we are of the view that the place where an employee performs work of a temporary nature (i.e., a special work site) is a particular place of work and not a general geographical area such as a city.
Consequently, it is generally from a special work site that all relevant facts of a project, or a particular phase of a project, as well as the terms and conditions of a taxpayer’s employment must be examined in order to determine whether the work performed by an employee was of a temporary nature for the purposes of subparagraph 6(6)(a)(i).
Best regards,
Isabelle Landry
Acting Manager
Business and Employment Income Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch