While some of us continue to work from home during COVID-19, others don’t have that flexibility and commute daily to and from the office. While in the past, many may have taken public transit to get to work, since the pandemic hit, the fear of taking mass transit has caused some daily commuters to begin driving to work, raising the question as to whether any of these commuting expenses may be tax deductible.
Generally speaking, the Canada Revenue Agency considers the cost of driving back and forth between home and work as a personal expense. But, what if your main place of employment is actually your home office and you only occasionally visit your employer’s place of business, but don’t have a regular work spot there? That was the issue in a tax case decided last month.
If you work primarily from home, your trips to the office could be tax deductible
The general rule
Before getting into the details of the case, let’s review the general rule surrounding the deductibility of automobile expenses by employees. If you’re an employee who uses your car for work, you may be able to deduct some of your automobile expenses on your tax return, assuming you meet certain conditions. First, you must normally be required to work away from your employer’s place of business or in different places. Second, under your contract of employment, you must be required to pay your own automobile expenses and this must be certified by your employer on a signed copy of the Canada Revenue Agency’s Form T2200, Declaration of Conditions of Employment. Finally, to claim vehicle expenses, you must not be the recipient of a “non-taxable” allowance for motor vehicle expenses.
If your employer does provide you with an allowance but you feel that the amount you received was not reasonable to cover the actual operating costs of your vehicle, you can deduct the “work” portion of your actual vehicle operating expenses, provided any employer vehicle allowance paid to you is included in your income. To justify your motor vehicle expense claim, it’s important to keep proper records of the kilometres driven for work versus those driven for personal use.
The case
The issue in the recent case was not the quantum of automobile expenses claimed — some $12,868 in 2015 — but rather whether the expenses were deductible at all. The taxpayer, an employee of a global beauty company that manufactures and sells cosmetics, was reassessed by the CRA for attempting to deduct vehicle travel expenses she had claimed for driving between the location of her home office, located in Pickering, Ont., and her employer’s principal place of business, located in Oakville, a one-way distance of 72 kilometres.
The sole question before the Tax Court was whether her expenses “were incurred for travelling in the course of … employment.” The taxpayer maintained that the travel at issue was, indeed, employment travel, as it was between two places of her employment (one being her home office.) The CRA, following its longstanding administrative position, felt that the taxpayer’s driving between her employer’s place of business in Oakville and her home should be considered personal travel and not employment travel.
The taxpayer’s employer provided her with a duly-completed Form T2200 for the 2015 taxation year, signed by her employer’s chief financial officer. The form attested to the fact that her employment contract required her to use a portion of her home for work, and that the percentage of her employment duties performed from home was 90 per cent.
The taxpayer testified that she worked daily from her home office, speaking with customers and potential customers, as well as with members of her sales team. This would account for the 90 per cent of her employment work referred to on the T2200. She would also meet with customers time to time by driving to their locations from her Pickering home office.
Occasionally, the taxpayer was required to travel to her employer’s Oakville office for “one-on-one” meetings with her boss, meetings with the entire marketing team and “town hall” meetings organized by the company for all its employees across the country and beyond. The taxpayer did not have her own office or workstation at the Oakville office and when she did need a place to work when she was there (typically before or after the particular function that required her to be there), she would either use the boardroom, if it was empty, or her boss’s office, if available.
Her required trips to the Oakville office were more frequent during times of spring and fall planning when new beauty products would be introduced to the Ontario market. The taxpayer also testified that she never worked from the Oakville office on a “9-to-5 basis,” rather attended there “irregularly and for one- or two-hour visits.”
In his analysis, the judge referred to a 2003 case involving employment travel, which concluded that the cost of travel by employees between two employment-related locations was not personal travel but rather was considered properly tax deductible as employment-related automobile travel. As the judge in that case wrote, “The evidence established beyond any doubt that when they left their offices in their homes and went to some other place to conduct business they were going from one place of business to another place of business and they did so when they were returning to their home offices. The Court does not consider it significant that after they came home they might have gone to bed or turned on the TV or had a sandwich or raided the refrigerator, whatever the case may be. That does not militate against a finding that they were involved in business related activities on the way home.”
The judge in the current case therefore concluded that the employee’s automobile expenses should be fully deductible since the taxpayer’s T2200 clearly indicated that she was required to work from a home office and specified that 90 per cent of her work was to be performed from there. In addition, it was clear thatthe taxpayer did not have appropriate office facilities available for her at her employer’s Oakville location.