11 December 1995 Internal T.I. 9518687 - MEALS AND BEVERAGE

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

							December 11, 1995

	HEADQUARTERS				HEADQUARTERS
	Audit Directorate			A.M. Brake
	Large Business Audit		(613) 957-2133

	Attention: Ian Rathwell
							951868

Paragraphs 67.1(2)(d) and (e)

This is further to our memorandum of February 16, 1995, various discussions and our meeting with the Department of Finance regarding the exemptions from subsection 67.1(1) provided by paragraphs 67.1(2)(d) and (e). The comments contained herein supersede our earlier comments and in particular special attention should be given to the wording contained in paragraph 67.1(2)(e) describing those who are generally entitled to partake in the consumption as, "all individuals employed by the person at a particular place of business of the person...".

Underlying any discussion on the exceptions from the restriction provided in subsection 67.1(1), should be the understanding that subsection 67.1(1) is intended to restrict all legitimate business expenditures for food, beverage or entertainment to recognize the personal element of the expenditures. Subsection 67.1(2) then provides exceptions from the restriction.

In our view, the exception provided in paragraph 67.1(2)(e) has very limited application. The Technical Notes to the paragraph indicate that it was enacted to provide exemption for the costs of food, beverage and entertainment consumed in an employer operated cafeteria and at an employer's Christmas party. While not restricted to a Christmas party, it could provide an exception for costs relating to another function that is "... generally available to all individuals employed by the person at a particular place of business of the person...". In this regard you might note that the present wording as amended, applicable to taxation years ending after July 13, 1990, is distinctly different from the previous wording which read as follows:

"(e) is incurred by the person for food, beverages or entertainment generally available to all employees of the person at a particular location".

The "place of business" refers to the location where these employees are considered to be employed, i.e., the employee's normal place of employment and not where the food is being served or at a temporary work location albeit a place of business of the employer. In this regard, it can be said that an employee may perform certain functions at different locations of the employer and at locations of customers or clients but he would be considered to be employed at the employer's place of business where he normally reports for work, receives his direction, picks up his pay cheque, etc. In other words, a particular employee would be considered to be employed at one particular place of business rather than being employed at each and every location that he/she performs a function for their employer.

While we agree that an individual could change his location with the same employer, in our view, he would be considered to be employed at one location at any particular time and the fact that he was temporarily at another location would not mean that his place of employment had changed. In the case of professional athletes such as baseball or hockey players, in our view, they would be considered to be employed at the home office of their Club rather than being employed at each and every facility in which they play. Similarly, in the case of actors or film producing employees, each and every filming site may be a place of business but not necessarily the place to which these individuals are considered to be employed. Therefore, the employees on site would not necessarily constitute all employees that are "employed at a particular place of business", since their location of being employed is other than the current site.

We have now received a response, copy attached, from our Legislative Policy Division regarding the referral to the Department of Finance with regard to treating allowances as meals, under special circumstances, within the wording of paragraph 67.1(2)(e) of the Act. As a result the exemption in paragraph 67.1(2)(e) will no longer be applicable to allowances. At this time we would like to reaffirm the position that the cost of meals for individuals in travel status or at "special work sites" is not exempt from subsection 67.1(1).

Accordingly, unless the value of the meals consumed by the employees are reported as taxable benefits, it is only the cost of meals provided employees at a "remote location" that are exempted under paragraph 67.1(2)(d). We assume that there was no intention to tax employees on a benefit in respect of the value of the food, beverage or entertainment consumed at a Christmas party as it would otherwise be exempt under paragraph 67.1(2)(d) and there would have been less reason to enact paragraph 67.1(2)(e). This raises the issue of the applicability of paragraph 6(1)(a) with regard to the value of free meals provided employees on other occasions within the area of an individual's employment location. In this regard, it should be noted that the scope of paragraph 6(1)(a) is not restricted by the workings of subsection 67.1(1) nor the exceptions provided under subsection 67.1(2).

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c. George Keable
Technical Publications