CRA loses struggle with development foreman over drive-to-work bills

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As a common rule, the Canada Income Company considers the price of driving backwards and forwards between dwelling and work as a private expense. However what if your house of employment is each your own home and varied work websites of your employer? This challenge got here up most just lately in a tax case involving a taxpayer’s declare for car bills. Earlier than delving into the info of the case, let’s overview the overall rule surrounding the deductibility of car bills by workers.

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The overall rule

If you happen to’re an worker who makes use of your automobile for work, you could possibly deduct a few of your car bills in your tax return, assuming you meet sure circumstances. First, it’s essential to usually be required to work away out of your employer’s office or somewhere else. Second, underneath your contract of employment, you have to be required to pay your personal car bills and this have to be licensed by your employer on a signed copy of the CRA’s Kind T2200, Declaration of Situations of Employment. Lastly, to say automobile bills, it’s essential to not be the recipient of a “non-taxable” allowance for motorcar bills.

The case

The current case concerned a taxpayer who was employed as a development foreman. On his 2017 private tax return, he claimed an employment expense deduction for motorcar bills totalling $9,853, representing 90 per cent of the entire bills of $10,948 that he incurred utilizing his private automobile, a Ford F350 truck, throughout that yr.

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The CRA initially allowed a deduction for motorcar bills totaling solely $7,175, disallowing the remaining $2,678 of the entire automobile bills, which, in accordance with the Company, represented bills that the taxpayer incurred whereas travelling from his dwelling to his employer’s varied development websites (and vice versa), on the idea that they had been “private bills and due to this fact weren’t deductible.”

At trial, the taxpayer diminished his declare to 85 per cent of his whole automobile bills, and the CRA conceded an additional $489 of bills, leaving a disputed whole of $1,642. The only real challenge within the case, due to this fact, was whether or not these remaining motorcar bills which had been incurred by the taxpayer whereas travelling from his dwelling to numerous worksites of his employer (and vice versa) had been correctly deductible underneath the Revenue Tax Act.

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The taxpayer’s employer is concerned within the development enterprise and builds homes and townhouses. As a foreman with the corporate, the taxpayer was chargeable for a crew of 17 folks. Throughout 2017, the corporate carried on roughly 50 tasks at quite a few development websites. In line with the taxpayer’s testimony, software upkeep was an vital a part of his employment duties as foreman as a result of his crew wanted to have the correct instruments and gear to finish work every morning. Certainly, a part of the taxpayer’s employment duties was to make it possible for employees had been in place every workday morning at a delegated development website and able to work with correctly functioning instruments, gear and supplies.

The corporate required the taxpayer to carry its instruments, gear and supplies dwelling with him every night time to safe them in his storage (positioned at his dwelling), to restore any damaged instruments and gear and to ship instruments, gear and supplies to its worksites the subsequent morning for work. The taxpayer used a delegated spot in his storage to retailer and restore his employer’s instruments, gear and supplies.

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On a typical workday morning, the taxpayer would go to his storage, load his employer’s instruments, gear and supplies into his truck and decide which worksites he and his crew had been required to work at that day. He would then drive to the assigned worksite and make sure that his crew was arrange and arranged for work. Often, throughout the day, he could be required to move a few of his crew and instruments and gear to a different worksite.

On the finish of every workday, the corporate required the taxpayer to load up all of its instruments, gear and supplies from the worksite into his truck and take them dwelling to his storage. He would unload the instruments, gear and supplies within the designated spot in his storage, clear the instruments and gear, and restore them as wanted. As a result of instruments had been usually damaged throughout a workday, he needed to repeatedly restore instruments in his storage at night time.

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The taxpayer additionally testified that there was a “massive danger” that instruments, gear and supplies could be stolen from worksites and that taking the instruments, gear and supplies again to his storage for secured nightly storage was an answer for his employer to keep away from such theft.

The choose reviewed the overall rule which is that the bills of travelling from an worker’s dwelling to his or her workplace (and vice versa) are private bills and never deductible as a result of they aren’t incurred in the midst of the worker’s duties. Through the years, nevertheless, there have been various circumstances which have acknowledged exceptions to the overall rule, reminiscent of when a taxpayer’s dwelling was discovered to be an important office, as mandated by their employer.

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On this case, the taxpayer argued that the motorcar bills he incurred whereas travelling from his dwelling to his employer’s varied worksites (and vice versa) needs to be correctly tax deductible as a result of his employer required him to carry employer-owned instruments, gear and supplies dwelling with him every night time for upkeep and safekeeping, and to move these instruments, gear and supplies to numerous worksites the subsequent day. Due to this fact, logically, the travelling to and from his dwelling needs to be thought-about “associated to his employment” and never private in nature.

The CRA, not surprisingly, disagreed. The Company considered these journeys because the taxpayer “merely driving to work, like every other worker,” and due to this fact thought-about them “private (journeys) and never incurred in the midst of (his) employment duties.”

Happily for the taxpayer, the choose concluded that, on a steadiness of chances, the taxpayer was ordinarily required to hold on his employment duties somewhere else, particularly in his storage, positioned at his home, and at his employer’s varied worksites, the place he supervised his crew and constructed properties. Thus, the extra $1,642 in motorcar bills had been correctly deductible.

Jamie.Golombek@cibc.com

Jamie Golombek, CPA, CA, CFP, CLU, TEP is the managing director, Tax & Property Planning with CIBC Personal Wealth in Toronto.