Vehicle Deductions
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Vehicle Deductions
Deciphering how to claim commuting expenses.
The Canada Revenue Agency has a number of “prescribed forms” that taxpayers are required to complete if they wish to take advantage of some of the provisions of the Income Tax Act. Failure to complete the forms can have unfortunate consequences, as illustrated by the case of Victor G. E. Kreuz v. Her Majesty The Queen, heard in the Tax Court of Canada under the Informal Procedure, Docket: 2009-658(IT)I.
Kreuz lived in Peterborough, Ontario. In 2005, two school boards employed him as a substitute teacher. As such, he was required to travel to as many as 40 or 50 schools on short notice in all kinds of weather. The trips could be anywhere from 10 to 60 or more kilometers from his residence. In order to fulfill these requests, a vehicle was an absolute necessity as other modes of transportation were either not available or impractical. The school boards did not reimburse his vehicle expenses. In 2005, Kreuz claimed vehicle expenses in the amount of $5,372 on his tax return.
The Minister of National Revenue disallowed the expenses claimed on the grounds that Kreuz was not required to carry on duties away from his place of employment, he was not ordinarily required to carry on his duties in different places, his expenses were not deductible by virtue of subsection 8(2), and he did not submit form T2200 for the year for one of the boards.
The Minister contended that the schools that Kreuz taught at were his employers’ places of business. Expenses incurred travelling from a taxpayer’s home to his employer’s place of business are not deductible. The court took the position that the places of business were the school boards’ Peterborough offices, not the individual schools. The Minister then submitted that if the Appellant were to get any relief, it should be only for travelling one way, to the schools, but not home. The court responded by saying that common sense should prevail and this argument didn’t merit comment. The real question was whether the car travel amounts were “expended … for travelling in the course of employment.”
The court looked to past cases for precedents. In Menard v. the Queen, 2004 DTC 516 and 2006 DTC 2515, the taxpayer, a longshoreman, was required to work at several different quays by the Port of Montreal. The Federal Court of Appeal determined the quays were different places within the meaning of paragraph 8(1)(h.1), but he wasn’t contractually obligated to use his vehicle to travel to them. In that respect, the case differed from Kreuz, but supported the argument that the schools were not the employer’s places of business.
The case that most paralleled the appellant’s situation was Rousseau v. The Queen, 2006 TCC 552. Rousseau was a plumber who claimed vehicle expenses for travel between his home and job sites. The court, in finding that Rousseau was in compliance with the Act quoted from another case, Rozen v. Canada; [1985] F.C.J. No. 1002, in which the court stated:
If an employee is obliged to travel to do his work and his employer is not prepared to pay the exact total cost of transportation, he must come within the requirements of 8(1)(h.1)(ii).
The third condition examined by the court was whether expenses incurred by Kreuz for travel between his home and his place of work could be deducted. The court followed the decision of the Federal Court of Appeal in Chrapko v. Canada; 88 DTC 6487, which held that these expenses could be deducted if the taxpayer was required to work at different places. Clearly, this was the case with Kreuz, and the court had no difficulty in finding that he was working while driving to the schools.
Having said all that, the court then found that Kreuz did not meet the requirements of subsection 8(10) with respect to one of the school boards in that he didn’t have a T2200. The court, therefore allowed his expenses relating to the school board that did provide him with a T2200, but not the one that didn’t. The judge’s decision doesn’t provide a breakdown of the expenses between the two boards.
The case really highlights the importance of having the “prescribed forms” when dealing with tax issues. Kreuz satisfied all the conditions for fully deducting his vehicle expenses except one – the two-page T2200. Amazing how much weight two pieces of paper can have.
Don Goodison, CFP, FCGA, is a partner of Kemp Harvey Goodison Hamilton Inc., Certified General Accountants, in Burnaby, B.C. E-mail
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