On the Road: When employees can claim travel expenses
As an employer, you may require your employees to travel using their own vehicles to client meetings away from your premises and, as a result, reimburse them on a per kilometre basis to help defray the costs of gas, oil and wear and tear on the motor vehicle.
The Income Tax Act sets a maximum amount that an employer can pay an employee for it to still be considered "reasonable" and, therefore, excluded from the employee's income. For 2013, that limit is 54¢ per kilometre for the first 5,000 kilometres driven and 48¢/km after that. In the three territories, there is an additional 4¢/km allowed for travel.
Many employers choose to reimburse their employees at per kilometre rates below the maximum allowable amount. If the employee feels that the employer's reasonable allowance is insufficient to cover the actual costs of operating their vehicle, the employee may be able to deduct the business portion of actual vehicle operating expenses.
A completed copy of CRA Form T2200, Declaration of Conditions of Employment, must be signed and certified by the employer acknowledging the employee's requirement to use a car for work and pay for some or all of the expenses. In this case, any employer reimbursement that is paid must be included in the employee's income.
Late last year, Canada Revenue Agency was asked whether an employer is obligated to complete and sign Form T2200 for a particular employee. In the situation described, the employee was entitled to be reimbursed for mileage from his employer, but, perhaps because he was unhappy with the amount being reimbursed, he chose not to claim it. Instead, he requested that his employer provide him with a signed Form T2200 indicating that he was obligated to pay his own car expenses. His employer refused to provide him with the certified form and wrote to the CRA to find out whether it was obligated to complete and sign the form.
The CRA responded that if an employer makes a "reasonable motor vehicle reimbursement... available to the employee for employment-related travel, and the employee chooses to forgo an employer's reasonable motor vehicle reimbursement, he or she would not meet the 'obligation to pay' condition in... the Act and would not be entitled to claim a motor vehicle expense deduction."