By Nizam Shajani, CPA, CA, MBA
Canada Emergency Rend Subsidy
Qualifying organizations can apply directly for the new Canada Emergency Rent Subsidy (CERS) through the Canada Revenue Agency (CRA). This means qualifying organizations can apply for the subsidy without the need to claim the assistance through their landlords. Applicants can claim the subsidy retroactively for the period that began on September 27 and ended on October 24, 2020. For eligibility see CERS. The application process and calculators can be found here.
Simplified Process for Claiming the Home Office Expense
Employees who worked from home more than 50% of the time over a period of a least four consecutive weeks in 2020 due to COVID-19 will now be eligible to claim the home office expenses deduction for 2020. The use of a shorter qualifying period will ensure that more employees can claim the deduction than would otherwise have been possible under longstanding practice.
A new temporary flat rate method will allow eligible employees to claim a deduction of $2 for each day they worked at home in that period, plus any other days they worked from home in 2020 due to COVID-19 up to a maximum of $400. Under this new method, employees will not have to get Form T2200 or Form T2200S completed and signed by their employer.
To simplify the process for employees choosing the detailed method, the CRA launched a simplified forms (Form T2200S and Form T777S) and a calculator designed specifically to assist with the calculation of eligible home office expenses.
Employer Provided Benefits and Allowances
It is the long-standing position of the CRA that travel between an employee’s home and a regular place of employment is generally personal travel, and any expenses related to that travel are personal expenses. An employee’s parking costs at a regular place of employment are also considered personal expenses.
When an employer pays for, reimburses, or provides an allowance to an employee for such transportation and parking expenses (collectively, commuting costs) or provides an employee with a motor vehicle that is used for such travel, the employee generally receives a taxable benefit.
However, the CRA acknowledges that employees who are required to commute to their regular places of employment to perform employment duties may incur additional commuting costs to minimize their risk of exposure during the COVID-19 pandemic. Employees may also incur costs to commute to their regular place of employment to pick up equipment that enables them to perform employment duties from home. The following tax treatment applies in these situations:
- Employee continues performing their employment duties at their regular place of employment
The CRA will not consider an employee to receive a taxable benefit where their employer pays for, reimburses, or provides a reasonable allowance for additional commuting costs incurred by that employee during the COVID-19 pandemic, that are over and above their normal commuting costs. This position is extended to the use of employer-provided motor vehicles for such travel, provided the employee did not normally commute to work using an employer-provided motor vehicle before the COVID-19 pandemic.
- Employee is performing their employment duties at home because their regular place of employment is closed
The CRA will not consider an employee to receive a taxable benefit where their employer pays for, reimburses, or provides a reasonable allowance for normal or additional commuting costs incurred by the employee to travel to their regular place of employment for any purpose that enables them to perform their employment duties from home (for example, to pick up equipment). This position is extended to the use of employer-provided motor vehicles for such travel.
Similarly, when a regular place of employment is closed due to the COVID-19 pandemic, the CRA will not consider an employer-provided parking spot at that place of employment to be available for an employee’s use. As such, the employer-provided parking will not result in a taxable benefit.
In both situations, employers are expected to maintain appropriate records to demonstrate that any allowances provided are reasonable in relation to the commuting costs incurred by the employee. Employees are expected to maintain appropriate records to account for their use of the employer-provided motor vehicles, including the total kilometers driven when commuting between home and their regular place of employment.
Home office equipment
The CRA recognizes that the COVID-19 pandemic has resulted in many employees having to work from home, where they may not have the necessary computer or home office equipment (desk, office chair, etc.) to perform their employment duties. In this particular context, the CRA will not consider an employee to receive a taxable benefit where their employer pays for or reimburses up to $500 of computer or home office equipment to enable the employee to carry out their employment duties, provided the employee submits receipts to the employer. This position is extended to accountable advances provided to an employee, but does not apply to allowances provided for this purpose.
It should be noted, however, that the $500 reimbursement amount is in respect of each employee rather than each piece of computer or office equipment that an employee may purchase. For example, if an employee purchases a computer for $400 and an office chair for $250, an employer can reimburse the employee up to $500 without the employee receiving a taxable benefit under the administrative position. By contrast, if the employer reimburses the employee the full amount for these purchases, the amount over $500 (that is, $150) must be included in the employee’s income.
The CRA’s existing policies recognize that an employer may pay for or reimburse the cost of an employee’s cell phone service plan, or Internet service at home to help carry out their employment duties. The portion used for employment purposes is not a taxable benefit. For more information, go to Cellular phone and Internet services.
Where an employer pays for, reimburses, or provides a reasonable allowance for meals to employees working at their regular place of employment during regular hours of work, the amount must be included in their employment income as a taxable benefit. However, the CRA’s existing policies maintain that there are certain circumstances where an employer can provide an overtime meal or allowance, or a subsidized meal, without the employee receiving a taxable benefit.
Declaration of Conditions of Employment
In an effort to make it easier for employers to complete Form T2200, the Canada Revenue Agency drafted an early version of the simplified Form T2200(also referred to as Form T2200 Short) and engaged with stakeholder organizations including employers, the payroll industry, and tax professionals for their feedback. The consultation period took place between August 24 and September 18, 2020. The version of T2200 Short that was available at that time has since been modified.
This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. © 2020 Shajani LLP