17 April 2019 External T.I. 2018-0775391E5 - Maintenance workers - clothing reimbursement

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: Is an employer reimbursement of clothing for maintenance workers a taxable benefit?

Position: Question of fact, in this case, likely yes.

Reasons: Reimbursement of clothing that can be worn outside of the workplace is generally a taxable benefit.

XXXXXXXXXX						2018-077539
S. Springate
April 17, 2019

Dear XXXXXXXXXX:

Re: Clothing reimbursement for maintenance workers

We are writing in response to your correspondence received on July 16, 2018, wherein you requested a technical interpretation of whether a reimbursement of clothing expenses is a taxable benefit.

In the situation described, an employer reimburses maintenance employees for footwear and clothing, up to a maximum amount per year, based on submitted receipts. Maintenance employees are not required to wear a specific uniform or protective clothing and all clothing receipts that are submitted are generally reimbursed. Additionally, as safety footwear is required, safety footwear will also be reimbursed.

Maintenance employees include cleaners, custodians, and trades workers. Typical job duties could include sweeping and mopping floors, yard clean up, and general repairs and maintenance.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R8, Advance Income Tax Rulings and Technical Interpretations.

Generally, where an employer pays or reimburses an employee for a personal expense, the amount paid or reimbursed will be a taxable benefit under paragraph 6(1)(a) of the Act. CRA’s longstanding position is that clothing is a personal expense if it is regular clothing that can be worn for non-business purposes outside business hours. As a consequence, we generally consider that an employee receives a taxable benefit when their employer provides or reimburses the cost of such clothing.

Guide T4130, Employers’ Guide – Taxable Benefits and Allowances, explains exceptions to the general position that employer provided or reimbursed clothing is a taxable benefit. It states that:

Your employee does not receive a taxable benefit if either of the following conditions apply:

• you supply your employee with a distinctive uniform they have to wear while carrying out the employment duties
• you provide your employee with protective clothing (including safety footwear and safety glasses) designed to protect them from hazards associated with the employment

If you reimburse or pay an accountable advance to your employee to buy uniforms or protective clothing and require receipts to support the purchases, the reimbursement or accountable advance is not a taxable benefit if:

• the cost of the uniforms or protective clothing is reasonable
• by law, the employee has to wear the protective clothing on the work site

Therefore, an employer reimbursement of safety footwear would generally not be considered a taxable benefit. However, a reimbursement of clothing expenses meant to compensate an employee for increased wear and tear on clothing that does not meet the exceptions outlined in Guide T4130 would generally be considered a taxable benefit.

We trust these comments will be of assistance to you.

Yours truly,

Jason R. Ward, CPA, CA
Acting Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch