EMPLOYEE VERSUS INDEPENDENT CONTRACTOR (IC) – POST-DOCTORAL FELLOWS (PDF)

On April 13, 2016, CRA added a discussion of whether PDFs are employees, outlining numerous relevant factors differentiating employment from IC status, including:

• Whether the payer approves and monitors work schedules (indicates employment).
• Whether the payer determines (indicates employment), rather than advising and guiding (indicates IC), the manner in which research or projects will be conducted.
• Whether the payer has the final word on research and other tasks (indicates employment) or whether this is decided jointly or by the PDF (indicates IC).

CRA also sets out a number of factors they consider neutral or inconclusive, including:

• Autonomy of the PDF resulting from the nature of the work.
• Tools and equipment provided by a third party.
• Any link between the PDF’s status as a student of the payer.

For further information see VTN Monthly Tax Update Seminar, Issue No. 419

MOVING EXPENSES FOLIO

On April 5, 2016, CRA cancelled Interpretation Bulletin IT-178R3, Moving Expenses, and replaced it with Folio S1-F3-C4, Moving Expenses. Some additions to the Folio that were not previously in the IT include:

Students resident in Canada who carry out an eligible relocation to attend an educational institution may deduct moving expenses against non-exempt scholarships (Paragraph 56(1)(n)) and research grants (Paragraph 56(1)(o)).

• Increased discussion to emphasize the importance of the connection between moving and business, employment, or attendance at an educational institution.
• Discussion on moves for self-employed individuals.
• Discussion has been added concerning the impact of a delay in selling the old residence on the eligibility of expenses related to such a sale.
• Two examples are given to illustrate the treatment of moving expenses in the context of multiple moves.
• Commentary that a move that occurs solely for personal purposes cannot be considered an eligible relocation. “these Folio updates”

For further information see VTN Monthly Tax Update Seminar, Issue No. 418

CCA – ELECTRIC VEHICLE CHARGING STATIONS

 In an April 26, 2016, CRA Release,“What’s New for Corporations 2016”, the following was noted:

• Electric Vehicle Charging Stations (EVCSs) acquired for use after March 21, 2016, that have not been used, or acquired for use, before March 22, 2016, which are set up to supply more than 10 kilowatts but less than 90 of continuous power, will be eligible for inclusion in Class 43.1 (30% declining balance). If the EVCS is set up to supply 90 kilowatts or more of continuous power it will be eligible for Class 43.2 (50% declining balance).
• Stand-alone electrical energy storage equipment acquired for use after March 21, 2016, that has not been used, or acquired for use, before March 22, 2016, that is part of an electricity generation system eligible for Class 43.1 or 43.2 may be included in the same class as the respective system.

For further information see VTN Monthly Tax Update Seminar, Issue No. 418

PROFESSIONAL FEES – VOLUNTARY DISCLOSURE

In a January 21, 2016 Technical Interpretation (2016- 0625731C6, Grondin, Yves), CRA noted that the cost to make a Voluntary Disclosure is not deductible under Paragraph 60(o). However, where income is earned from a business, the cost to make a Voluntary Disclosure may be deductible pursuant to Paragraph 20(1)(cc). 

From the point in which CRA informs the taxpayer that it accepts the Voluntary Disclosure and that it will revise the income or tax liability under the program, professional fees incurred to assert the claim will generally be allowed pursuant to Paragraph 60(o). 

For further information see VTN Monthly Tax Update Seminar, Issue No. 418

EMPLOYMENT EXPENSES – REQUIRED BY CONTRACT

A March 4, 2016 Federal Court of Appeal case (Urquhart vs. H.M.Q., A-56-15) addressed the deductibility of employment expenses incurred by a car salesman. The Tax Court denied all employment expenses as the expenses were not required under the employment contract.

Taxpayer wins, in part
The Court opined that when determining whether an expense is required under the contract of employment, as required for an expense to be deductible (Paragraph 8(1)(f)), the contract should be reviewed objectively to determine whether it was implied that the employee would be required to incur costs to earn commission income.

The taxpayer’s evidence of invoices and charge backs demonstrate a mutual understanding that expenses to deliver the cars to the taxpayer’s dealership and purchasing of accessories that were to be included on the car were required. Without incurring these expenses, the taxpayer could not deliver the product that the dealership had agreed to deliver to the client. These expenses were allowed.

The Court then reviewed expenses incurred to build client relations. Although these expenses helped to produce income, they were not required under the contract. Without such a requirement, they were not deductible.

For further information see VTN Monthly Tax Update Seminar, Issue No. 418