Hines v. R. - TCC: Taxpayer an employee - not entitled to deduct expenses

Hines v. R. - TCC:  Taxpayer an employee - not entitled to deduct expenses


Hines v. The Queen  (December 7, 2015 – 2015 TCC 317, Lyons J.).

Précis:   In 2008 Mr. Hines worked for Wellspring Energy Solutions Ltd. (“Wellspring”) from which he received $88,298 (the “Amount”).  His work for Wellspring involved the development of an oil well pump.  He claimed that he was not an employee of Wellspring and that the Amount included the reimbursement of expenses he incurred on behalf of the company.  The Minister assessed on the basis that he was an employee and did not allow the deduction of the expenses Mr. Hines claimed he paid as he produced no records to document them.  The Tax Court concluded that Mr. Hines was an employee and disallowed the expenses claimed because of the lack of any documentation.

As a result the appeal was dismissed with costs.

Decision:   The Court reviewed the well known tests and concluded that Mr. Hines was an employee of Wellspring:

[39]         I am unconvinced that the appellant was in business on his own account as an independent contractor. I am satisfied and find that he was working within Wellspring’s business for its benefit as an employee.

[40]        The appellant submits that subordination, a concept utilized in the Civil Code of Quebec, is persuasive and should be applied as the appellant was not subordinate to anyone at Wellspring. I concur with the respondent’s submission that subordination is not a relevant factor to be taken into consideration in the common-law context.

[41]        Based on the totality of the evidence and for the foregoing reasons, I conclude that the appellant was not in business on his own account.

As to the expenses claimed the Court found a complete lack of documentation:

[42]        Given my finding that he was an employee, it is strictly unnecessary to deal with expenses. However, I will provide some comments. The appellant’s evidence with respect to the purported expenditures was vague, inconsistent, hard to reconcile and not credible. I reject his evidence on this aspect. He estimated that approximately half of the Amount he received relates to expenses for which he was reimbursed as he had incurred those for the benefit of Wellspring. He said he did not claim these as expenses because these are Wellspring’s expenses. Despite the estimate, he had no records of expenses that he had incurred on behalf of and submitted to Wellspring nor any evidence that provides any linkage to the Amount assessed nor records of his own expenses as an independent contractor. When asked about expenses that were to be reimbursed to him, he stated that he did not tally up the expenses but simply submitted these to the accounting department of Wellspring as it was its responsibility.

As a result the appeal was dismissed with costs.