When Free Parking is not Free

In a recent court case Anthony v. Canada(2011 FCA 336) it was held that free parking provided to employees at a workplace is a taxable benefit that must be included in an employee’s income.  This case involved approximately 100 employees of Branksome Hall, a private girls’ school in Toronto.  The employees were assessed a taxable benefit by the CRA based on the Fair market value of the free parking provided by the school.

The wording in the Income Tax Act  as it pertains to taxable benefits seems to give the  CRA  considerable scope in determining what is a taxable benefit.  Armed with this broad definition and a need for ever increasing tax revenues one can only wonder what employee benefit CRA will  set its sights on next.

 

How to Give Like Santa and not end up like Scrooge

December is the time of year employers often choose to give a gift to their employees as a Christmas present.  However, anytime there is an exchange between the employer and an employee the tax consequences need to be considered.

Canada Revenue Agency has the following rules for gifts:

Cash and near-cash gifts or awards are always a taxable benefit to the employee.   A near-cash item is one that can be easily converted to cash such as a gift certificate, gift card, gold nuggets, securities, or stocks.

Non-cash gifts given to employees up to a total value of $500 are exempted from being treated as a taxable benefit to the employee with the following conditions:

  1. A gift has to be for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child;
  2. There is no limit to the number of tax-free non-cash gifts and awards you may give your employee in a year;
  3. The employee must be unrelated [at arm's length] to the employer;
  4. If you give gifts totalling more than $500 the excess amount is taxable.  For example,  if you give an employee gifts in the year  with a total value of $650, there is a taxable benefit of $150 ($650 -$500).

 

Employee or independent contractor?

 Prue v. M.N.R., 2011 TCC 9, (January 10, 2011), http://decision.tcc-cci.gc.ca/en/2011/2011tcc9/2011tcc9.html

This appeal brought before the Tax Court of Canada focussed on whether an individual was an employee or an independent contractor.  I haven’t read it line by line to come up with a detailed analysis but here is what I gleaned from the document.

1.  Document the  nature of the relationship – put it in writing, sign it.  Do the parties involved  want this to be an employee/employer relationship or that of an independent contractor.

2.  Individuals may find the idea of being an independent contractor appealing in that as a business venture they can claim expenses otherwise denied to employees.  However,  if, at some point in the future, the services of the contractor are no longer needed they might suddenly have a chance of heart.  Now they want to be an employee so they can claim Employment Insurance benefits.  To that end they can apply to the Rulings Officer at a Tax Services Office operated by Canada Revenue Agency (“CRA”) on the insurability of their employment.    This opens a whole can of worms for the employer with CRA - out of which very little of any good can result!

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