20 October 2008 External T.I. 2008-0280221E5 - Travel to/from a remote work location

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Can an allowance that is paid by an employer to its employees for the costs incurred for travel between an employee's home and a central departure point be excluded from income under subparagraph 6(6)(b)(ii) of the Act?

Position: Question of fact - but provided allowance or benefit is reasonable - yes.

Reasons: The law.

XXXXXXXXXX 								Michael Cooke
									2008-028022
October 20, 2008

Dear XXXXXXXXXX :

Re: Taxability of Transportation Allowances

We are writing in response to your correspondence of May 29, 2008, requesting an interpretation of the remote work location income exclusion in subsection 6(6) of the Income Tax Act (the "Act").

In your letter you indicate that XXXXXXXXXX (the "Employer") operates XXXXXXXXXX in Canada ("work sites"). The Employer provides its employees with board and lodging while working at the work sites. The employees work a XXXXXXXXXX rotation at the work sites. At the end of the XXXXXXXXXX rotation the employees must return to their homes for a XXXXXXXXXX period.

Due to the remoteness of the work sites the only way the Employer can get its employees to and from the work sites is by chartered aircraft. Moreover, because the employees live in various places across Canada, the Employer has arranged for the chartered aircraft to pick up its employees at centrally located departure points in Canada. The Employer pays for all the costs related to the chartered aircraft and pays an allowance to its employees to assist with the transportation costs to get to the central departure point (the "Allowance").

You ask whether the Allowance can be excluded from income under subparagraph 6(6)(b)(ii) of the Act.

Our Comments:

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following comments.

Under subparagraph 6(6)(b)(ii) of the Act, inter alia, where an employee works at a location that qualifies as a remote work location the value of, or a reasonable allowance for, transportation between the remote work location and any location in Canada can be excluded from the qualifying employee's income.

The application of the rules in subsection 6(6) of the Act remains a question of fact that can only be determined on a case-by-case basis. However, provided the conditions in subsection 6(6) of the Act are otherwise met, and subject to the overall reasonableness of the particular Allowance, it is our view that subparagraph 6(6)(b)(ii) can apply to exclude the Allowance from income.

We trust our comments will be of assistance.

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch