Date: 20010920
Docket: 2000-2639-IT-I
BETWEEN:
STÉPHANE RIVARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
McArthur, J.T.C.C.
[1] This is an appeal by the appellant, who represented himself, from assessments made by the Minister of National Revenue ("the Minister") for the 1995, 1996 and 1997 taxation years. The Minister, in computing the appellant's employment income, disallowed the deduction of certain expenses incurred by the appellant.
[2] The first issue is whether the appellant was an employee of Métal Marquis inc. ("the company"). In issuing and confirming the notices of reassessment dated March 22, 1999, for the taxation years at issue, the Minister assumed the following facts, inter alia:
[TRANSLATION]
(a) in 1994, the appellant was an employee of Métal Marquis inc. . . . during the entire year;
(b) the appellant was a junior engineer when he was hired by the company;
(c) the appellant's duties and responsibilities have not changed much since he was hired;
(d) during the taxation years at issue, the appellant worked under the supervision of Guillaume Marquis;
(e) during the taxation years at issue, the planning of the work to be done was handled by his supervisor, Guillaume Marquis;
(f) . . . the appellant worked on several projects at once for the company;
(g) . . . the appellant had a regular work schedule, which corresponded with the company's hours, namely from 8:00 a.m. to 5:00 p.m.;
(h) . . . the appellant had to fill out a time allocation form;
(i) . . . the appellant was paid at an hourly rate by the company;
(j) . . . during the taxation years at issue, all the expenses incurred by the appellant in doing his work were reimbursed by the company;
(k) the appellant's expense accounts were submitted on the company's letterhead and approved by the company;
(l) . . . the appellant had an office at the company's place of business;
(m) . . . the company was the appellant's only client;
(n) . . . the Minister concluded that the appellant was an employee of the company during the taxation years at issue;
(o) the Minister therefore issued the notices of reassessment dated March 22, 1999, for the taxation years at issue.
[3] Mr. Rivard testified for himself, and Guillaume Marquis testified for the respondent.
[4] The appellant stated the following facts:
[TRANSLATION]
Relevant facts:
(1) From 1995 to 1998, I was an engineering consultant. I had a fixed place of business.
(2) I carried on business under the firm name S.R.I. I was a registrant for the purposes of the consumption taxes (GST/QST).
(3) I performed consulting work for various clients, who called upon me for very specific projects.
(4) My office was my principal workplace, even though I had to travel regularly to see my clients in the performance of my work for them.
(5) Métal Marquis inc. (hereinafter "Marquis") was one of my most important clients.
(6) I had no written contract with Marquis. Unlike its employees, I was not covered under any benefit plan paid for by Marquis. I took out income insurance on my own.
(7) I paid all business expenses myself. In 1997, I hired an employee to help me with my various contracts. I paid all the contributions, payroll taxes, etc. associated with that employee.
(8) My fees were calculated on the basis of the time spent on the various contracts and the economic value of the work performed. I was the one who decided how much to bill for a contract.
(9) I organized and planned the performance of my contracts based on various factors. Among other things, I took account of the availability of the other people involved. However, I myself determined the deadlines, where the work was done and the schedule.
(10) During the period in question, I myself assumed the professional risk associated with the practice of my profession. I limited that risk by complying with professional standards and taking out liability insurance. Finally, I was considered a consultant in private practice for the purposes of the Ordre des ingénieurs du Québec.
(11) I owned all the equipment (computer and other equipment, tools and vehicles) needed to perform my contracts. I paid all maintenance, repair and insurance costs. I bore the risk of breakdown or theft.
(12) I billed my clients. I assumed all the financial risks of business.
(13) For tax purposes, I prepared my income tax returns on the assumption that I was "self-employed".
(14) Following an audit at Marquis, Revenue Canada Taxation determined that my providing of services to that company constituted employment.
[5] The comments I would make about those facts are as follows:
1. Correct in part but somewhat misleading. As an engineering consultant, the appellant basically had only one client, the company, and his business was operated mainly out of the company's premises.
2. Correct.
3. He actually had just one client, the company.
4. His principal place of business was not his office at home but rather the company's premises, where he spent more than 90 percent of his working hours.
5. Correct, but the company was more than a client: Guillaume Marquis was also his supervisor.
6. Correct.
7. For the most part, the company reimbursed him for his expenses. The other two sentences are correct.
8. It is true that he billed the company for his services at $20 an hour most of the time. The monthly billing corresponded to 35 to 50 hours of work a week, done regularly, month after month, aside from two weeks of vacation in the summer.
9. Probably correct, although I am convinced that the final decision was the company's.
10. Correct.
11. The appellant owned a personal computer; however, he could use the company's equipment.
12. I do not think that the appellant assumed any financial risk other than the risk of the company's bankruptcy, which exists in most employer-employee relationships.
13. Correct.
14. Also correct.
[6] The Court of Appeal has explicitly approved the following formulation of the issue by Cooke J. in Market Investigations:[1]
The observations of LORD WRIGHT, of DENNING, L.J., and of the judges of the Supreme Court in the U.S.A. suggest that the fundamental test to be applied is this: "Is the person who has engaged himself to perform these services performing them as a person in business on his own account?" If the answer to that question is "yes", then the contract is a contract for services. If the answer is "no" then the contract is a contract of service.
[7] The Minister believes that Mr. Marquis and the appellant attempted to establish a relationship between independent contractors but that they actually had an employer-employee relationship. The appellant had been an employee in 1994 and considered himself an employee of the company after 1997 when an employee stock option plan was created.
[8] Applying the tests set out in Wiebe Door, [1986] 3 F.C. 553, I conclude as follows:
1. Control test
There is no doubt that the company, and specifically Mr. Marquis, exercised control over the appellant.
2. Profit-loss
The appellant recorded his hours and billed for them on the basis of a fixed hourly rate. He was reimbursed for some of the expenses he incurred when he travelled on company business. It is difficult to say which expenses he may have paid himself and not been reimbursed for. He occasionally worked for third parties, but 98 percent of his services were provided to the company. The appellant had little or no risk of loss. He was paid at a fixed hourly rate. He submitted his invoice to the company every month and was then paid.
3. Tools
The company provided most of the tools.
4. Integration
The company had 50 or so employees. The appellant was one of several engineers on whom the company's production depended.
[9] The foregoing shows that the appellant and Mr. Marquis attempted but failed to establish an employer-employee relationship. It is legitimate to seek to organize one's affairs in such a way as to obtain income tax relief insofar as this is permitted by law. In this case, however, the appellant did not succeed.
[10] The appellant stated that he became an employee of the company again in 1998 because he wanted to take advantage of the employee stock options. It is not enough to call oneself an independent contractor. It is not just a matter of nomenclature. The Court must examine the whole of the relationship between the parties. I am satisfied that the appellant was an employee of the company during the taxation years at issue, and the expenses in question are not deductible. The appeal is dismissed.
Signed at Ottawa, Canada, this 20th day of September 2001.
"C. H. McArthur"
J.T.C.C.
Translation certified true on this 21st day of June 2002.
[OFFICIAL ENGLISH TRANSLATION]
Erich Klein, Revisor
[OFFICIAL ENGLISH TRANSLATION]
2000-2639(IT)I
BETWEEN:
STÉPHANE RIVARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on August 15, 2001, at Rouyn-Noranda, Quebec, by
the Honourable Judge C. H. McArthur
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Dany Leduc
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1995, 1996 and 1997 taxation years are dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 20th day of September 2001.
|
"C. H. McArthur" |
J.T.C.C.
Translation certified true
on this 21st day of June 2002.
Erich Klein, Revisor