Sharma, 2026 TCC 182: a commission salesperson may deduct only the expenses the employer required, and the Tax Court is bound by Urquhart to say so

2026 TCC 182 · Tax Court of Canada

Author: Sas Tullo

This is a general procedure appeal about the expenses an employed commission salesperson may deduct under paragraph 8(1)(f) of the Income Tax Act. Mr. Sharma, a top-performing insurance advisor at RBC Life, claimed between $120,000 and $174,000 a year in “subcontractor fees” for sales leads, most of it paid to his spouse and to a corporation she controlled. The Crown won on both the law and the facts. The decision matters because Yuan J. explains why he thinks the taxpayer’s reading of the provision is the better one, yet holds that he is bound by the Federal Court of Appeal’s decision in Urquhart to apply the narrower reading, and because it shows how an undocumented arrangement with a spouse unravels under cross-examination.

Facts

Mr. Sharma was employed by RBC Life Insurance Company from 2010 as a Wealth Insurance Advisor and was recognized internally as a platinum advisor (paras 3-4). His employment income, including commissions, ranged from $331,910 in 2013 to $423,981 in 2015 (para 5). The Minister reassessed 2013 to 2016 to disallow claimed employment expenses of between $137,254 and $177,371 a year (paras 7-8). During the trial the parties settled seven of nine categories, leaving subcontractor fees and advertising costs for decision (paras 9-10).

The subcontractor fees were $173,900 in 2013, $120,000 in each of 2014 and 2015, and $150,000 in 2016 (para 11). In 2013 the payments went to bulk vendors of personal data and to Mr. Sharma’s spouse and daughter; from 2014 they went to 2417680 Ontario Inc., a corporation controlled by his spouse, which the Court called Spouseco (paras 13-14). The advertising claim was $7,350 in 2016 for printed materials for existing clients (paras 15-16). There was no written agreement with RBC Life about expenses, but the employer’s Form T2200 declared that the contract required Mr. Sharma to pay his own expenses (para 30). A senior RBC Insurance director testified, credibly, that RBC Life would neither require nor expect its advisors to buy leads or hire others to generate them (paras 33-38).

Issues

The Court framed two questions: whether the Act permits the deduction of the subcontractor fees and advertising costs at all, and, if so, what portion of the amounts claimed should be allowed (paras 17-19). Within the first question lay a dispute over the meaning of subparagraph 8(1)(f)(i), which requires that the employee “under the contract of employment was required to pay the taxpayer’s own expenses” (paras 27-31).

Holding

The appeals for 2013 and 2014 were dismissed. The appeals for 2015 and 2016 were allowed only to give effect to the amounts the Crown conceded at trial for automobile, home office, and parking expenses. The subcontractor fees and advertising costs were disallowed in full for every year, and the Respondent was awarded costs because the adjustments in the taxpayer’s favour were less than four per cent of the amount in dispute (paras 152-153).

The court’s reasoning

Yuan J. began with the structure of Subdivision A: subsection 8(2) permits a deduction against employment income only where section 8 expressly allows it, and paragraph 8(1)(f) is the category for commission salespersons, subject to the conditions in subparagraphs (i) to (iv) and a ceiling equal to the commissions earned (paras 22-26). Mr. Sharma argued that subparagraph (i) is satisfied where employer and employee understand that the employee’s discretionary sales expenses will not be reimbursed; the Crown argued that it requires an agreement that the employee incur the specific categories of expense claimed (paras 29-31).

The Court treated Urquhart v. Canada, 2016 FCA 76, as dispositive. There the Federal Court of Appeal held that whether expenses were required under the employment contract is a question of contractual interpretation, approached objectively, and that the trial judge erred by not segregating expenses the employer implicitly required from those “merely aimed at helping produce income by building positive client relations” (paras 43-48). Yuan J. read Urquhart as requiring the Court to decide whether the specific expenses claimed were expressly or impliedly required under the contract and held that, although the competing interpretation was never addressed there, the decision binds the Tax Court (para 49). On the director’s evidence, buying leads was not something RBC Life required or condoned (paras 39, 92).

The judge then explained, over some forty paragraphs, why he would have preferred the taxpayer’s reading. He traced the provision from the 1948 amendment to the Income War Tax Act through subsection 11(7) of the 1948 Act (paras 52-65). Hansard, in his view, showed an intention to put employed commission salespeople on the same footing as independent agents, who decide for themselves what to spend (paras 66-74). The text uses the verb “pay” rather than “incur”, which points to who is ultimately financially responsible, and the midamble describing the deductible amounts neither cross-references nor tracks subparagraph (i) (paras 79-82). The only discernible policy for the condition is to stop an employee who could claim reimbursement from deducting what is really the employer’s expense (paras 83-89). History, text, and policy tend to support the broader reading, but Urquhart remained binding (paras 90-91).

On the facts, the claim failed regardless. Mr. Sharma offered no documents for the 2013 bulk lead purchases, and the three invoices his accountant had sent to CRA Appeals were shown on cross-examination to be fabricated; the judge found that he “knowingly provided CRA Appeals with invoices that were not genuine” and weighed that against his credibility (paras 99-106). No evidence was given of what the daughter did for her $10,000 (paras 108-110). As for the spouse and Spouseco, the Court found the arrangement was “likely one that was intended to divert a portion of Mr. Sharma’s income to Mrs. Sharma and their daughter” (para 117), relying on the spouse’s lack of relevant experience, marketing agreements with dates and addresses that did not fit, four irreconcilable versions of the 2015 fee, and payments to Spouseco that tracked Mr. Sharma’s payroll deposits almost to the dollar (paras 119-138). The judge accepted only that Mrs. Sharma provided administrative help worth $12,000 a year, but even that was barred because the T2200 stated that no assistant was required (paras 141-144). The advertising claim failed for want of proof of payment (paras 148-149).

Practical implications

Paragraph 8(1)(f) is not a general business-expense regime for employees. Under Urquhart, as the Tax Court reads it, the employee must show that the employer, expressly or by implication from the nature of the role, required the particular kind of outlay. A T2200 that answers “yes” to the general question about paying one’s own expenses does not help where the same form answers “no” to the question about hiring an assistant (para 144).

In my view the more interesting part of the judgment is the obiter analysis. Yuan J. has set out the strongest case yet made for the broader reading of subparagraph (i), and he notes that the Tax Court’s own cases are divided (para 42 and footnote 1). The question is ripe for the Federal Court of Appeal, but it will need a cleaner vehicle than this one, where the evidence would defeat the claim on any reading. The decision also shows the cost of submitting unreliable documents to CRA Appeals: the fabricated invoices were not relied on at trial, yet they shaped the credibility findings on every other issue. Paragraph 8(1)(f) as quoted in the reasons matches the current text on the Justice Laws website (Act current to September 30, 2026; section 8 as a whole was amended in 2026, but the wording of paragraph (f) is unchanged). Whether an appeal was taken is not verified here.

For commissioned employees the takeaway is practical. Keep the T2200 consistent with what you claim, keep invoices and bank records for every payment, and expect payments to family members to be treated as income splitting unless there is clear evidence of real services at a market price.

This comment is general information, not legal advice. The law may have changed since the decision; check the current text in the tax wiki.

Citation and links

Sharma v. The King, 2026 TCC 182, judgment dated October 22, 2026, Yuan J. (appeals heard March 31 and April 15, 2025, Toronto, general procedure). Reasons on the Tax Court’s site. Also on CanLII.