Principal Issues: 1) Whether offshore commercial fishers are permitted to deduct food expenses based on a per diem rate per sharesperson? 2) Whether the deductible portion of meal expenses may be determined with reference to subsection 67.1(1.1) of the Income Tax Act?
Position: 1) & 2) No.
Reasons: 1) & 2) See response.
XXXXXXXXXX
2013-050845
T. Baltkois
February 25, 2014
Dear XXXXXXXXXX:
Re: Commercial fishing - food expenses
We are writing in response to your fax of October 8, 2013, wherein you requested our comments concerning the deductibility of food expenses. Specifically, you have asked whether offshore commercial fishers are permitted to deduct food expenses based on a per diem rate per sharesperson. You have also asked whether the deductible portion of food expenses may be determined under subsection 67.1(1.1) of the Income Tax Act.
Our Comments
This technical interpretation provides general comments about the provisions of the 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 70-6R5, Advance Income Tax Rulings.
As discussed in Guide T4004, Fishing Income 2012, crew members of a fishing vessel who receive a share of the catch are commonly referred to as sharespeople and are considered to be self-employed. Such individuals may be distinguished from employees who are crew members of a fishing vessel and who are remunerated on a salary and wage basis.
It is our understanding that the captain or owner of a fishing vessel in the circumstances described is a sole-proprietor fisher (an unincorporated, self-employed individual) or a partner of a fishing partnership. In both cases, any income earned from fishing would constitute business income.
Paragraph 18(1)(a) of the Act provides that no outlay or expense is deductible in computing the income of a taxpayer from a business, unless it was made or incurred for the purpose of gaining or producing income. Paragraph 18(1)(h) of the Act denies a deduction for personal or living expenses other than travel expenses (including meal expenses) incurred in the course of carrying on business while away from home.
As you are aware, subsection 67.1(1) of the Act limits the deduction of amounts incurred in respect of food, beverage, and entertainment to 50% of the lesser of the amount actually paid and an amount that is reasonable in the circumstances. Subsection 67.1(1.1) of the Act provides an exception to this general limitation for long-haul truck drivers and deems the deductible portion of certain meals to be 80% of the lesser of the amount paid or payable and a reasonable amount in the circumstances.
Generally, any deduction by the owner or captain of a commercial fishing vessel for meal expenses incurred for sharespeople would be 50% of lesser of the actual amounts expended and a reasonable amount. This would also be the case in situations where sharespeople are required to provide their own meals and claim a deduction in computing income. However, as discussed in Guide T4004, the owner of a commercial fishing vessel, the captain of the vessel, and the sharespeople cannot duplicate expenses; a deduction in respect of meal expenses may only be claimed by one of these individuals.
A claim for meal expenses should generally be evidenced by receipts in accordance with subsection 230(1) of the Act. That subsection requires every person carrying on business and every person who is required by or pursuant to the Act, to pay or collect taxes or other amounts, to maintain records and books of account in such form and containing such information as will enable the taxes payable under the Act to be determined.
Despite the above, the Canada Revenue Agency allows transport employees to use the simplified method for calculating meal expenses (e.g. a flat rate of $17 per meal (max $51 per day), no receipts, log book of trips) when claiming travel expenses under paragraphs 8(1)(e), (g), and (h) of the Act. A transport employee is generally an employee whose duties consist of transportation activities which regularly require him or her to travel on journeys of substantial distance and duration. Other individuals are only allowed to use the simplified method when claiming meal expenses for the purposes of the medical expense tax credit, the northern residents deduction, or the moving expense deduction. For more information on the simplified method, see paragraph 11 of IC 73-21R9, Claims for Meals and Lodging Expenses of Transport Employees.
We trust these comments will be of assistance to you.
Yours truly,
Nerill Thomas-Wilkinson, CPA, CA
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
