24 November 1995 External T.I. 9530365 - BUSINESS MEALS

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.

Tax Executive Institute
December 6, 1995

Question No. XV.

BUSINESS MEALS AND ENTERTAINMENT EXPENSES

A.Subsection 67.1(1) limits the deductibility of amounts paid in respect of food, beverages and entertainment. Paragraph 67.1(2)(e) provides an exception to amounts incurred to provide food, etc., that is "... generally available to all individuals employed by the person at a particular place of business of the person...". What is the Department's position concerning the application of 67.1(1) in the following circumstance:

The taxpayer undertakes to provide a training course for all its employees. To ensure the full attention and concentration of the employees, the training is conducted at a location away from the usual place of business. The taxpayer pays all associated expenses for the cost of training, including the cost of meals consumed by employees during the training period. While all employees eventually receive the training, it is impractical for business and logistical reasons to send all employees to the training at one time; hence, the training will be undertaken over a number of months. In other words, although all employees will ultimately benefit from the training, they will not benefit simultaneously.

DEPARTMENT'S POSITION

The cost of meals provided to employees in travel status are subject to subsection 67.1(1) as would be the costs of meals provided at a "special work site". The value of the meals provided constitute a taxable benefit in the hands of the employees by virtue of paragraph 6(1)(a) unless these employees are in travel status or the benefit is exempt by virtue of paragraph 6(6)(a). Should a benefit be reflected on the employees T4 slips, the costs of providing the meals would be exempt from subsection 67.1(1) by virtue paragraph 67.1(2)(d).

In our view, paragraph 67.1(2)(e) has very limited application. The technical notes to the paragraph indicate that it was enacted to provide exemption for costs relating to a 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...", similar to that described above where the employees do not all attend at the same time but they do all attend within a very limited time frame. For example, an employer holds a planning session where all employees participate for at least one day over an 8 day session.

In summary, the 67.1(2)(e) exception would not apply in the scenario outlined above however the 67.1(2)(d) exception may be applicable.

Author: A. M. Brake
File: 5-953036.MB
Date: November 24, 1995