Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether three allowances currently paid under an existing collective agreement, if combined into a single payment would qualify for purposes of determining the northern residents travel deduction under paragraph 110.7(1)(a) of the Act.
Position: No
Reasons: The effect of combining three allowances that are currently paid under the terms of an existing collective agreement into a single payment does not constitute a proposed transaction on which we can provide an advance income tax ruling. Further, paragraph 110.7(1)(a) of the Act applies "in respect of travel expenses" and part of the payment will not be in respect of travel expenses
XXXXXXXXXX 2006-019743
August 25, 2006
Dear XXXXXXXXXX:
Re: XXXXXXXXXX
We are writing in response to your letter of July 28, 2006, requesting an advance income tax ruling letter on behalf of the XXXXXXXXXX.
Your request concerns the application of section 110.7 of the Income Tax Act (the "Act") to employees of the XXXXXXXXXX who are currently paid a "vacation travel allowance", a "settlement allowance" and a "northern housing allowance" pursuant to the terms of a collective agreement. The XXXXXXXXXX is proposing to pay all three of the allowances in a single payment instead of three separate payments. You requested that we rule that the combined payment would qualify for purposes of determining the northern residents travel deduction under paragraph 110.7(1)(a) of the Act.
The effect of combining the three allowances that are currently paid under the terms of an existing collective agreement into a single payment does not constitute a proposed transaction on which we can provide an advance income tax ruling. Further, paragraph 110.7(1)(a) of the Act applies "in respect of travel expenses". Although you propose to make a single payment, part of the payment will still be in respect of the settlement and housing allowances that are required to be paid under the collective agreement and therefore, would not be in respect of travel expenses.
In view of the above, we are unable to provide you with the rulings requested and will return your deposit under separate cover. Should you have any questions, please do not hesitate to contact me at 613-957-2049.
Yours truly,
Randy Hewlett
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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