CRA denies deduction to taxpayer who tried to claim auto and work-from-home expenses

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In court, the taxpayer produced Forms T2200 for both 2021 and 2022, one from each of his employers. The taxpayer admitted that he filled out these forms himself for signature by the relevant persons at the companies.

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Both forms indicated that the taxpayer was required to pay his own expenses while carrying out his duties of employment. In response to the question “Did you normally require this employee to travel to locations that were not your place of business, or between different locations of your places of business, during the course of performing their employment duties,” the “no” box was ticked off on each form.

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In response to the question “Did you normally require this employee to be away for at least 12 consecutive hours from the municipality and metropolitan area (if there is one) of your business where the employee normally reported for work,” the “no” box was also ticked off.

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When it came to the question “Did you require this employee to pay for expenses for which they did or will receive a reimbursement,” the “no” boxes were ticked off. Furthermore, in response to the question “Did you require this employee to pay other expenses for which they did not receive any allowance or reimbursement,” the “no” boxes were also ticked off. Next to that answer, the taxpayer had added a handwritten note which said that he “had to be in the local Salmon Arm area to be in the Salmon Arm office Monday to Friday,” for the Salmon Arm job, with a similar note on the Kelowna T2200. The taxpayer testified that the handwritten notations were his, and that he had submitted the altered T2200s to his employers for signature.

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In response to the question, “did this employee’s contract of employment require them to rent an office away from your place of business,” the “rent an office away from your place of business” language was crossed out by the taxpayer and replaced, in handwriting, by “required to be in the Salmon Arm office to perform the job duties,” with a similar notation on the Kelowna T2200.

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Finally, in response to the question “Did you require the employee to use a portion of their home for work,” the “no” box was ticked off for both forms.

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Needless to say, the T2200 forms were not very helpful to the taxpayer’s case for deducting employment expenses, and the judge agreed.

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When dealing with the deductibility of motor vehicle expenses, the judge noted that one of the requirements under the Income Tax Act is that the employee “must ordinarily be required to carry on the duties of the office or employment away from the employer’s place of business or in different places.” That was clearly not the case here.

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The judge cited prior jurisprudence: “It is well established that travel expenses incurred by a taxpayer in travelling to and from his home to his place of work are considered personal expenses. They are not travelling costs encountered in the course of the taxpayer’s duties. Rather, they enable him to perform them.”

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As for his rental accommodations in Salmon Arm and Kelowna, since the taxpayer was not ordinarily required to carry on the duties of his employment away from his employers’ places of business (or in different places), the rent and other utilities expenses he paid in both of these locations cannot be considered deductible employment expenses incurred in the performance of the duties of his employment.

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While the judge “acknowledge(d) the difficult personal situation of the (taxpayer),” she was unable to rule in the taxpayer’s favour as he simply didn’t meet the conditions required under the Income Tax Act to deduct his employment expenses.

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Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. [email protected].

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