2018-0739061E5 Tax Treatment of Program Payments

Principal Issues: The tax treatment and reporting requirements for payments provided under the XXXXXXXXXX.

Position: Likely taxable, unless 6(6) applies to exclude.

Reasons: See response.

Author: Baltkois, Thomas
Section: 6(1); 6(6); 56(1)(n); 56(1)(r)

XXXXXXXXXX                                                                   2018-073906
                                                                                           T. Baltkois
November 6, 2019

Dear XXXXXXXXXX:

Re: Tax treatment of program payments

We are writing in response to your correspondence of January 10, 2018, concerning the income tax treatment and reporting requirements for payments provided to XXXXXXXXXX (University) XXXXXXXXXX under the XXXXXXXXXX (Program).

In the situation you describe, the XXXXXXXXXX (Agency) has developed a Program to assist University XXXXXXXXXX with XXXXXXXXXX. The objective of the Program is to provide University XXXXXXXXXX with exposure to XXXXXXXXXX, assist with the learning of specialized skills, and XXXXXXXXXX establish a XXXXXXXXXX in XXXXXXXXXX.

Where a University XXXXXXXXXX qualifies for funding under the Program, the Agency provides a per-kilometre motor vehicle allowance for travel (one return trip) between home and the location where the elective is undertaken, and either an accommodation allowance (a per night allowance if accommodation is provided by family or friends) or a reimbursement of accommodation expenses (up to a specified monthly amount where receipts are provided).

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (“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 particular transactions 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 70-6R9, Advance Income Tax Rulings and Technical Interpretations.

According to the information provided, a University XXXXXXXXXX is a XXXXXXXXXX in training on an educational licence and a salaried employee of the University. It is our understanding that University XXXXXXXXXX continue to receive a salary from the University when undertaking an elective.

As a University XXXXXXXXXX is not a student, any payments received under the Program would be received in respect of, in the course of, or by virtue of a University XXXXXXXXXX’s employment with the University.

Specific-employment related training

The Canada Revenue Agency (“CRA”) generally considers that courses taken to maintain or upgrade employment-related skills are primarily for the benefit of an employer when an employee is expected to resume his or her employment for a reasonable period of time after completion of the training. Under the CRA’s administrative position, tuition fees and other associated costs (such as books, meals, travel, and accommodation) that are paid for, or reimbursed, by an employer would not be required to be included in an employee’s income where these conditions are met. See Guide T4130, Employers’ Guide – Taxable Benefits and Allowances, for additional information.

It is our view that the CRA’s administrative position also applies in situations where the courses or training taken by an employee are paid for, or reimbursed, by a person other than his or her employer, provided that the related funding was received in respect of, in the course of, or by virtue of the employee’s employment.

While the determination as to whether the two conditions outlined in Guide T4130 are met is a question of fact and must be considered on an employee by employee basis, it appears unlikely that the University would be the primary beneficiary of an elective taken by a University XXXXXXXXXX, even where an elective is considered to constitute training.

That is, the stated purpose of the Program is to provide University XXXXXXXXXX with exposure to XXXXXXXXXX to establish a XXXXXXXXXX in XXXXXXXXXX.

Regular place of employment (RPE)

As discussed in Guide T4130, a RPE is any location where an employee regularly reports for work or performs their employment duties. A particular location may be considered a RPE even though the employee may only work at that location on a periodic basis during the year (for example, once or twice a month). A RPE does not have to be a place of business of the employer, and an employee may have more than one RPE if the employee regularly performs their employment duties at more than one work location.

It is the CRA’s longstanding position that travel between an employee’s home and a RPE is generally considered personal travel, and that any expenses related to that travel (including meals, board and lodging expenses) are personal expenses. By contrast, where an employer requires an employee to proceed directly from home to a point of call (for example, a client’s office), return home from a point of call, or travel between two regular places of employment, such travel is employment travel. Any expenses related to that travel are employment expenses.

Where an employee receives a reimbursement or is provided with an allowance for personal or living expenses, the amount is generally included in income under subsection 6(1) of the Act, unless it falls within the exceptions listed in subparagraphs 6(1)(a)(i) to (vi) or 6(1)(b)(i) to (ix) of the Act.

Based on the information provided, it appears likely that University XXXXXXXXXX perform duties of employment during an elective, and that the location where these duties are performed is a RPE for these individuals. As such, any payments received under the Program would constitute a reimbursement or an allowance for personal expenses and be required to be included in income under subsection 6(1) of the Act, unless subsection 6(6) of the Act applies.

Employment at a special work site or remote work location

Generally, subsection 6(6) of the Act provides that benefits, reimbursements, and allowances (not in excess of a reasonable amount) received in respect of board and lodging or transportation, may be excluded from income in certain circumstances. The conditions which must be met for a particular work location to be considered as a special work site or a remote work location in respect of a particular employee are explained in paragraph 4 of Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations.

As the wording used in subsection 6(6) of the Act references amounts received in respect of employment, such benefits, reimbursements, and allowances may be provided by an employer or a third party. Accordingly, the fact that University XXXXXXXXXX receive reimbursements and allowances from the Agency (rather than the University) would not in and of itself impair the application of subsection 6(6) of the Act.

Accordingly, where it is determined that a particular University XXXXXXXXXX has satisfied all of the conditions in subsection 6(6) of the Act, the reimbursements and allowances received under the Program would be excluded from income.

Reporting requirements

Generally, every person making a payment (payer) described in subsection 153(1) of the Act is required under section 200 of the Income Tax Regulations to make an information return in prescribed form (i.e., a T4 or T4A slip and summary).

A T4 slip is prepared where an employer pays an employee employment income, commissions, taxable allowances and benefits, or any other remuneration. By contrast, a T4A slip is prepared by a payer (including an employer) of other amounts related to employment (e.g., pension, lump-sum payments, retiring allowances, fees or other amounts for other services, etc.). However, if the amount of the payment is $500 or less, the CRA generally waives the T4A reporting requirement unless income tax was withheld at source. In such cases, the payer must issue a T4A slip.

In the situation described, the Agency (as payer of the amounts under the Program) would have the obligation to issue a T4A slip to University XXXXXXXXXX participating in the Program to the extent that the payments are required to be included in income and exceed the CRA’s $500 threshold. However, a T4A slip would not be required where subsection 6(6) of the Act applies to exclude the payments from income or where the payments made by the Agency are less than $500.

We trust these comments will be of assistance.

Yours truly,

Sandro D’Angelo, CPA, CMA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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