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When facing professional discipline, are the fees deductible?

By Andrew Rickard | August 17 2016 01:28PM

The Tax Court of Canada (TCC) has ruled that expenses incurred in order to continue practicing a profession are not deductible from employment income.

In Ross v. The Queen the TCC considered the case of Shelly Ross, a pharmacist who worked as an employee at various pharmacies in Sydney, Nova Scotia between 1990 and 2013. In 2013, she faced three complaints of professional misconduct and was required to satisfy a number of conditions, including enrolling and successfully completing an ethics course at Mount Saint Vincent University in Halifax.

On her tax return for 2013, Ross claimed the $4,989.73 she paid as the result of the disciplinary process as legal expenses. Her reasoning was that the expenses qualified since they were a result of the complaints made under the Pharmacy Act and were incurred to preserve her ability to earn an income; if she had not paid these amounts, she could could not have continued to work as pharmacist.

A similar request rejected

Justice Valerie Miller rejected this argument and concluded that none of the amount could be deductible since it did not meet the requirements of paragraph 8(1)(b) of the Income Tax Act. Miller relied on Blagdon v The Queen, a case from 2002 which rejected a similar request to have tax law interpreted broadly to permit a deduction for legal expenses incurred to protect one's ability pursue a particular livelihood.

"Paragraph 8(1)(b) has a narrow scope. It is intended to apply where an employee has incurred legal expenses in attempting to collect unpaid salary or wages, or in attempting to settle a dispute with an employer or former employer with respect to the amount of salary to which the employee is entitled," reads the decision. "It is clear that the amount of $4,989.73 was not incurred by the Appellant to collect or establish a right to salary or wages. It was incurred to allow her to preserve a future right to work as a pharmacist."

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