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: Is the employer the primary beneficiary of reimbursed moving expenses that do not qualify for the moving expense deduction in section 62?
Position: Likely yes
Reasons: See response
Author: Ryer, Andrea
Section: 6(1)(a), 62, 248(1) "eligible relocation"
June 8, 2016
Re: Moving expenses reimbursed by an employer
We are writing in response to your enquiry, which we received by fax on January 27, 2016, and subsequent telephone conversations (XXXXXXXXXX/Ryer), enquiring about whether certain moving expenses incurred by an employee and reimbursed by his or her employer should be included in the employee’s income when the move does not qualify as an eligible relocation (e.g., the move is less than 40 km).
You have advised that the employer is a public utility distributing XXXXXXXXXX, including to a remote area. In order to ensure continuous service in the remote area, the employer requires a dedicated technician to live there. Although there is a shortage of technicians in the area, the employer has hired an employee who is willing to relocate. You advise that the employee will incur the type of moving expenses that would be eligible for the moving expense deduction in section 62 of the Income Tax Act (Act), but for the fact that the distance between the employee’s old residence and his new work location is only 28 km. You also advise that the employer requested the move and considers itself the primary beneficiary of the relocation.
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of a particular transaction proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R7, Advance Income Tax Rulings and Technical Interpretations.
Generally, the value of benefits of any kind received or enjoyed by a taxpayer in respect of employment is included in a taxpayer’s income from employment under paragraph 6(1)(a) of the Act, unless the benefit is specifically exempted under the Act or the employer is determined to be the primary beneficiary of the benefit. To determine who the primary beneficiary of a particular benefit is, all of the relevant facts must be reviewed on a case-by-case basis. It is the employer's responsibility to determine whether the primary beneficiary is the employer or the employee. Although no single factor may be conclusive, a positive answer to one or more of the following questions may suggest that the employer is the primary beneficiary of the benefit:
* Does the employer have a business purpose for providing the benefit?
* Is the benefit required for the employee to perform the employment duties more effectively?
* Is the benefit required to fulfill a condition of employment?
* Does the employer have a moral or contractual obligation to provide the benefit to ensure that employees are not unduly subject to harm from performing the employment duties?
Based on the facts presented, the employer is reimbursing the employee’s moving expenses to ensure that it has qualified staff available to provide services to the remote area, suggesting that the employer is the primary beneficiary. Where an employer reimburses reasonable expenses of the sort listed in subsection 62(3) of the Act in respect of a move (whether or not it qualifies as an eligible relocation) and the employer is the primary beneficiary of that reimbursement, the amount would not be included in the employee’s income.
We trust these comments will be of assistance to you.
Nerill Thomas-Wilkinson, CPA, CA
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
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