With the price of gasoline hitting a buck a litre in some Canadian
communities this past week, the cost of commuting just got more expensive. If
you're an employee, you probably already know that you can't write off the cost
of driving to and from your office from your income. The rationale for this is
that these expenses are considered to be personal in nature, presumably based on
the theory that where you to choose to live is a personal decision and therefore
the cost of getting to and from work is, by and large, determined by where you
decide to live.
But what if you're self-employed, can the costs of commuting to and from a
place of business, even on a regular basis, be tax deductible? This was the
issue before the Tax Court last month.
The case concerns Roger Chapman, a Calgary resident, who deducted more than
$9,000 of motor vehicle expenses incurred in traveling between his home and
work. Mr. Chapman was a consultant who provided estimating services for
engineering projects. During the year in question, he worked on two projects
which he obtained through placement agencies. Each project required extensive
Under the first contract, Mr. Chapman was assigned to provide services to a
construction company in Joffre, Alta. During the three-month term of the
contract, Mr. Chapman commuted from Calgary on a weekly basis, racking up more
than 500 kilometres a week in his car.
Under the second contract, he was assigned for nine months to provide
services to an engineering firm in Acadia, south Calgary. He commuted
approximately 250 kilometres weekly to reach this work location.
The result was that his total mileage for the year was nearly 16,000
kilometers. Since he used his car exclusively for business, he deducted the
entire $9,000 cost of operating his car for the year.
The Canada Revenue Agency disallowed Mr. Chapman's motor vehicle expenses on
the grounds that they were not incurred for the purpose of earning income but
rather were personal in nature, using the reasoning that, as with the case of an
employee, where one lives is a personal decision.
The judge disagreed and felt that the same theory should not apply to the
self-employed, saying "on a common sense view, expenses in traveling to
temporary work assignments are not personal and are incurred for the purpose of
earning income. The work assignments performed by Mr. Chapman were limited in
duration, lasting three and nine months. In these circumstances, the expenses
were not personal but were made in order to fulfill contractual commitments with
the placement agencies."
The judge also commented that since Mr. Chapman had no other place of
business of his own other than his home and that it is likely that he negotiated
the work contracts, albeit through placement agencies, from his own home, then
his home ought to be considered his "base of operations." As a result, travel
between his base of operations and various places of business of his customers
should be an allowable business expense.
With the ever-increasing gas prices across Canada, this decision should
provide the self-employed with some relief -- if not from the pumps -- then at
least from the taxman.
GRAPHIC: Black & White Photo: Kevin Van Paassen, National Post; Commuting costs
incurred by self-employed people travelling to temporary work assignments are
deductible, the Tax Court has ruled, overturning a Canada Revenue Agency