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Employee or Independent Contract

This is an excellent example of mistaken notions of what makes one an Independent Contractor rather than an Employee. This case illustrates several criteria and clarifies terminology and case law. Scroll to the bottom for the full legal summary.

​Mathias v The Queen - Engineer who worked on a yearly contract for a company in the oil and gas sector.

Mathias v. The Queen.

Tax Court of Canada, November 28, 2019 (Amended December 20, 2019).

Neutral Cite: 2019 TCC 271.

Court File No. 2015-4411(IT)G.

Russell J.

Employee or independent contractor

Whether taxpayer’s income properly characterized as employment income or income from business

The taxpayer was an engineer who worked on an yearly contract for a company in the oil and gas sector. On his returns for the 2004 through 2008 taxation years, the taxpayer claimed deductions for work-related expenses on the basis that his income was income from business. His claims were denied on reassessment, with the Minister taking the position that the taxpayer earned employment income from which no such deductions were allowed. The taxpayer appealed from those reassessments to the Tax Court of Canada and his appeals were allowed in part.

The Court first considered whether, under the factors set out in the jurisprudence, the taxpayer was an employee or an independent contracto r. After reviewing the taxpayer’s work arrangements, the Court held that the business was that of the appellant’s employer and the income provided for work services performed by the appellant was employment income and not business income.

The Court then considered the expense claims made by the appellant to determine whether such claims were deductible from employment income . It reviewed the requirements for such deductions set out in section 8 of the Income Tax Act before concluding that none of the expense claims advanced by the appellant met those statutory conditions.

Finally, the appellant had also appealed from the Minister’s denial of expenses claimed in respect of property income , but the Crown conceded that such expenses were in fact deductible. The appellant’s appeal was therefore allowed to the extent of the deductions from property income claimed. — Income Tax Act, RSC 1985, c. 1 (5th Supp.), s. 8.

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