2021-0911851C6 2021 CTF – Q9 – Work-Space-In-The-Home Expenses

Principal Issues: Whether an employer is required to determine if an employee principally performs their duties away from the office of the employer?

Position: See response.

Reasons: See response.

Author: Zabolotney, Brad
Section: 8(1)(i)(iii), 8(2), 8(10), 8(13), 67

2021 CTF Annual Tax Conference
CRA Roundtable

Question 9: Work-Space-In-The-Home Expenses

An employee is only entitled to deduct certain expenses under section 8 where the employee’s employer has prepared a Form T2200, Declaration of Conditions of Employment. The employer’s responsibility is to determine if the conditions of employment necessary to entitle the employee to deduct the expenses have been met.

In respect of the work from home (“WFH”) expenses allowed under subsection 8(13), no deduction is permitted except to the extent that the work space is either (i) the place where the individual principally performs the duties of office or employment or (ii) used exclusively for earning income from office or employment and is used on a regular or continuous basis for meeting customers or other persons in the ordinary course of performing duties of office or employment.

Due to COVID-related stay-at-home orders, many employees now work from home. Understandably, the CRA implemented the T2200-S form, and allowed flexibility in how employees deducted the WFH expenses.

Post-COVID, combinations of conducting some work at the employer’s office and some work from home are expected. Tracking whether or not an employee is required to work principally from home may be difficult. Can the CRA provide guidance to employers as to how they should determine if an individual is required to principally perform their duties away from the office of the employer?

CRA Response

Generally, a salaried employee may deduct home office expenses under subparagraph 8(1)(i)(iii) of the Income Tax Act (“Act”) if the conditions in that subparagraph, and those in subsections 8(10) and (13) of the Act are satisfied.

Subparagraph 8(1)(i)(iii) of the Act allows for the deduction of work-space-in-the-home expenses (i.e., supplies consumed directly in the performance of the duties of employment), where an employee was required by contract of employment to supply and pay for those expenses, the expenses are reasonable, and the employee was not provided a reimbursement by their employer for these expenses.  

It is the general position of the Canada Revenue Agency that when an employee and employer have entered into a formal work arrangement, the employee is “required by contract of employment” to provide a work space in their home and pay for some additional costs associated with providing this work space. While the actual agreement can take many different forms (for example, a verbal agreement, an e-mail from the employer confirming the agreement, or a formal written agreement initiated by either the employee or the employer), what is critical is that the details of the work arrangement are agreed to and clearly understood by both the employee and the employer.

Subparagraph 8(13)(a)(i) of the Act provides that expenses which are otherwise deductible under subparagraph 8(1)(i)(iii) of the Act cannot be deducted as work-space-in-the-home expenses unless the work space is the place where the employee principally (i.e., more than 50%) performs their duties of employment.

Where the conditions in subparagraph 8(1)(i)(iii) of the Act are met by an employee, subsection 8(10) of the Act further requires that Form T2200, Declaration of Conditions of Employment, be completed and signed by their employer to certify the conditions of employment. However, a signed Form T2200 does not provide an employee with any assurance that the expenses incurred are deductible, since the Act contains other criteria that the employee must satisfy.

With regard to the completion of Form T2200, Question 10 asks that an employer approximate the percentage of the employee’s duties of employment that were performed at a work space in their home. An employer is not asked to certify whether this work space was the place where the employee principally (i.e., more than 50%) performed their duties of employment.

As the nature of work arrangements and the manner in which they are documented will differ by employer, an employer should use the method which best aligns with their practices and procedures to collect the information needed to respond to Question 10 on Form T2200.

Brad Zabolotney
2021-091185
November 25, 2021

All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without the prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5.

© Her Majesty the Queen in Right of Canada, 2022

Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistribuer de l'information, sous quelque forme ou par quelque moyen que ce soit, de façon électronique, mécanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.

© Sa Majesté la Reine du Chef du Canada, 2022