First, the employee’s obligation to personally pay for the office rent or supplies must be specifically required under their contract of employment. To prove this, the employee must have their employer sign and provide a Form T2200, Declaration of Conditions of Employment, before they can deduct the expense.
Second, once an expense like electricity bills or rent meet the criteria under subsection 8(1), there are further limiting rules under 8(13). In particular, for an eligible expense to be deductible, the work space must be either: (a) the employee’s principal place of employment, or (b) used by the employee exclusively for the purpose of earning income from employment and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the duties of employment.
Given that many employees are now being required by their employers to work from home and are abiding by the government’s request to self-quarantine and avoid personal contact with others, the issue arises as to whether online virtual meetings and conference calls can cause an employee’s home office to be viewed as a place where that employee regularly meets customers (keeping in mind that the home office must be used “exclusively” for the purpose of earning income from employment). In the past, the CRA has taken the position that virtual/skype meetings and conference calls do not count as meetings.
In light of how the current pandemic is causing the location of work to rapidly change, however, we suspect it will only be a matter of time before the Tax Court is called upon to express its views.
In regards to whether or not the work space is the place where an employee “principally performs” his or her work duties, there is no guidance on how this performance is calculated, and it’s not clear if a short (e.g., one- or two-month) stint of mandatory work from home would qualify, or if the performance is evaluated on an annual basis.
As more and more employers are moving towards “hotelling,” where employees no longer have an assigned space at the employer’s office — and there may in fact be more employees than available workspaces on a given day — many employees have already been working at least part time from home. As a consequence, even if measured on an annual basis, with the ability to work remotely accelerating, more and more employees will be working more than 50% of their time from home rather than at their employer’s office.
If an expense is deductible by an employee in determining their taxable income for income tax purposes, there’s also corresponding GST/HST relief. In particular, section 253 of the Excise Tax Act provides a rebate to certain employees for the GST/HST paid on expenses that are deductible in computing the employee's income from employment under the Income Tax Act.