BETWEEN:
and
REASONS FOR JUDGMENT
(Delivered orally from the bench on October 31, 2005, at Ottawa, Ontario.)
[1] The sole question before me is whether the appellant is barred by paragraph 18(12)(a) of the Income Tax Act ("Act") from deducting workspace-in-home expenses for the 2000, 2001 and 2002 taxation years.
[2] Paragraph 18(12)(a) reads as follows:
(12) Work space in home. Notwithstanding any other provision of this Act, in computing an individual's income from a business for a taxation year,
(a) no amount shall be deducted in respect of an otherwise deductible amount for any part (in this subsection referred to as the "work space") of a self-contained domestic establishment in which the individual resides, except to the extent that the work space is either
(i) the individual's principal place of business, or
(ii) used exclusively for the purpose of earning income from business and used on a regular and continuous basis for meeting clients, customers or patients of the individual in respect of the business.
[3] More specifically, the question is whether the workspace in his home was the appellant's principal place of business in the years at issue. If not, was it used exclusively for the purpose of earning income from business and used on a regular and continuous basis for meeting clients, customers or patients of the appellant in respect of the business?
[4] The evidence disclosed that the appellant works full time at the Pontiac Physiotherapy Clinic. He also stops by the Wakefield Physiotherapy Clinic every morning to drop off the laundry that has been cleaned at his home and to pick up other laundry and also the necessary paperwork for managing the business from his home too. This management function includes daily administrative accounting and the preparation of activities for the patients. There is one computer which is used by the receptionist and the appellant at the Wakefield Clinic and on which the patients' charts are saved. The other physiotherapist at that clinic does not use that computer. The appellant does not have an office at that clinic.
[5] As for the Pontiac Clinic, the receptionist there uses a work desk and a computer which is also used by another physiotherapist and a massage therapist to record their patients' charts. All physiotherapy treatments by the appellant are done at that clinic. He sees approximately 16 to 20 patients a day. The receptionist books the appointments, greets the patients, changes the sheets, and collects the payment when the patient pays right away.
[6] All the billing is done by the appellant from his home. The address and telephone number shown on the invoices are the clinic's. The appellant does all his accounting from his home. Payments are sent to a post office box. He returns all his patients' telephone calls from his home office in the evenings and on Saturdays. The appellant calls his patients from home to provide follow-up, or to give them professional advice. The appellant says that he makes an average of three to five calls per evening and on Saturdays.
[7] At the request of his patients, the appellant also fills out forms both for insurance and for disabled parking purposes. This work is done at his home office and he charges for the service. He also books appointments from home when he speaks to his patients on the telephone. He keeps with him at home the appointment schedule. He also does at home statistical analysis relating to his work.
[8] The appellant does not physically treat patients at home; this is done at the clinic. Usually, for security reasons, he does not give his home telephone number to patients, but when he knows them well enough, he will provide it to them.
[9] He spends nothing on advertising, but he agreed to being advertised without charge by the Ottawa Valley Guide and Canada411. The addresses and telephone numbers shown there are those of the Wakefieldand Pontiac Clinics. On the T4 slips issued to his employees for income tax purposes, both clinics appear as the employer, and the addresses of both are shown.
[10] The Minister disallowed the workspace-in-home expenses on the basis that the workspace in home was not the appellant's principal place of business.
[11] I am satisfied that most of the work done by the appellant with respect to the Wakefield Clinic is done from his home. His home office is, in my view, his principal place of business as regards that clinic and the test in subparagraph 18(12)(a)(i) is met.
[12] With respect to the Pontiac Clinic, the work performed there is as important as that done in the appellant's home. He does physiotherapy treatments for his patients at the clinic during workdays, and does follow-up on those treatments from his home in the evenings and on Saturdays. He also does all the administrative work at home. It may be difficult to say, then, with respect to that clinic, that his workspace in home is his principal place of business. However, I am satisfied that the workspace in home, as described by the appellant, is used exclusively for the purpose of earning income from business.
[13] The question that remains to be determined is whether it is used on a regular and continuous basis for meeting patients of the appellant in respect of the business. In Vanka v. R., [2001] 4 C.T.C. 2832, [2001] T.C.J. No. 663 (QL), it was accepted that the professional was meeting his patients within the meaning of subparagraph 18(12)(a)(ii) of the Act by making himself available to answer their queries by telephone.
[14] In the present case, I find that the appellant's making telephone calls to patients each evening and on Saturdays from his home is likewise comparable to meeting those patients directly at his home.
[15] I accept as a fact that the appellant operated this way for security reasons. The appellant gave treatments and then did follow-up and talked to his patients directly, by telephone, from his home office.
[16] The appellant was making three to five calls per evening and also made calls on Saturdays. This has not been challenged by the respondent. In my view, we can say that the appellant used his workspace in his home on a regular and continuous basis for meeting clients. In Interpretation Bulletin IT-514, the Canada Customs and Revenue Agency takes the position that a home office used by a doctor to meet five patients a day for five days each week is an example of a workspace which would be considered to be used on a regular and continuous basis for meeting patients. I therefore find that the appellant here meets the test of subparagraph 18(12)(a)(ii) of the Act and is allowed to deduct expenses for workspace in home in respect of the Pontiacclinic.
[17] As the amount of the expenses is not challenged by the respondent, and in view of my conclusion regarding each clinic, the appeals are allowed with costs and the appellant is entitled to deduct the workspace-in-home expenses for the 2000, 2001 and 2002 taxation years, pursuant to the provisions of subsection 18(12) of the Act.
Signed at Ottawa, Canada, this 17th day of March 2006.
COURT FILE NO.: 2005-1134(IT)I
STYLE OF CAUSE: MARTY RYAN v. THE QUEEN
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: October 31, 2005
REASONS FOR JUDGMENT BY: The Honourable Justice Lucie Lamarre
DATE OF JUDGMENT: March 17, 2006
APPEARANCES:
COUNSEL OF RECORD:
Firm:
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada