Question Period Note: TAXABLE BENEFITS - SPECIAL WORK SITES

Can the Minister comment on why the CRA is holding back the refunds of workers in Newfoundland and Labrador?

• The Canada Revenue Agency (Agency) is committed to protecting the fairness and integrity of our tax system for all Canadians.
• The confidentiality provisions of the Acts administered by the Agency prevent me from commenting on specific cases.
• However, the determination of the taxability of a benefit must be made on a case-by-case basis. It is the employer’s responsibility to determine whether the benefit provided to their employees is taxable and include it the income of the employee
• In cases where the Agency has identified non-compliance, it may issue assessments for unpaid amounts to both employees and employers.
• Objections and appeals processes are available to all taxpayers who disagree with an assessment or reassessment. Taxpayer Relief provisions may also be applied to provide relief on interest and penalties.

The Canada Revenue Agency (CRA) has recently issued a decision following an Employer Compliance Audit of a company in the Atlantic region.

The Income Tax Act requires that all amounts received by a taxpayer as an allowance for personal or living expenses, or for any other purpose, be reported as income. This is the case unless these allowances fall within a specific exception.

The tax treatment of an allowance for personal and living expenses reflects the Agency’s longstanding position and there has been no change in this respect to the Income Tax Act or to the CRA’s interpretation or treatment of taxable benefits.

A review of the company's books and records identified that what the company had deemed as non-taxable benefits for its employees were indeed taxable. The employer had classified these benefits as non-taxable by claiming the work was done at a special work site under subparagraph 6(6)(a)(i) of the Income Tax Act (ITA)*.

Following a review of the facts, the CRA disagreed with the company’s position and issued amended T4 slips and a letter to the employer advising that the benefits have been assessed as taxable.

The impacted employees have begun to receive their Notices of Reassessment which indicate they have a balance outstanding and their 2019 tax refunds are being applied to this balance. However, a number of individuals have contacted the CRA reporting that they did not receive amended T4s from the employer. These individuals were advised to contact their employer in order to receive their amended T4s and information on the reassessments.

The local Member of Parliament has advised impacted employees who have contacted him to send all related complaints to his office. On March 4, his office contacted the CRA’s Problem Resolution Program to advise that the MP will be representing all affected employees and that authorizations will be forthcoming.

In addition to the reassessments, the company was assessed for the employer and employee share of Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums payable, as well as penalty and interest, as these amounts were not withheld on the taxable benefits paid to the employees.

Both the employer and employees have the right to file an objection and have 90 days from the Notice of Reassessment to do so.

*Under subparagraph 6(6)(a)(i) of the ITA, a special work site is a location at which the "duties performed were of a temporary nature" if the employee maintained at another location a "self-contained domestic establishment" as his or her "principal place of residence":
• that was, throughout the period, available for the employee's occupancy and not rented to any other person, and;
• to which, by reason of distance, the employee could not reasonably be expected to have returned daily from the special work site or;
• if the period during which the employee was required by his or her duties to be away from his or her principal place of residence, or to be at the special work site, was not less than 36 hours.

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