CRA finds that a vendor’s disclosing on its invoices the amount of meal allowances paid to its sales people transferred the 50% s. 67.1 denial onto the purchasers

S. 67.1(1) generally grinds the deduction for amounts payable in respect of the human consumption of food or beverages by 50% thereof. However s. 67.1(2)(c) provides an exception for:

“an amount for which the person is compensated and the amount of the compensation is reasonable and specifically identified in writing to the person paying the compensation”.

The taxpayer, which sold goods for a fixed price payable in instalments, paid reasonable meal allowances to its employees for their travel in connection with the sales (e.g., installations). These allowances were not disclosed to the purchasers except that the interim invoices for the instalments contained a note, for information purposes only, setting out the cumulative amount of the meal allowances paid to date.

Before concluding that (by virtue of the exception in s. 67.1(2)(c)) s. 67.1(1) did not limit the deduction to the taxpayer for its incurring of the meal allowances and that such 50% denial instead applied to the purchasers respecting the cumulative amount of the meal allowances referred to in the interim invoice note, CRA indicated:

• The interim billing payments of the purchasers were intended to pay or reimburse the taxpayer for the costs incurred in performing the contract, including related reasonable meal allowances; and it was unnecessary to specify their amount in the contracts or for them to be billed separately.
• A note on an invoice allowing a purchaser to determine the amount for food or beverages that was included in the total amount invoiced was sufficient to satisfy the “specifically identified in writing” requirement of s. 67.1(2)(c).
• In light of the broad interpretation of “in respect of”, the cumulative amount of reasonable meal allowances paid or payable to date referred to in such interim invoices note disclosure was “an amount paid or payable in respect of the human consumption of food or beverages” for the purposes of the application of s. 67.1(1) to the purchasers.

Will purchase agreements start prohibiting the vendor from making any disclosure of any meal allowances incurred by it?

Neal Armstrong. Summary of 21 February 2025 Internal T.I. 2021-0902871I7 F under s. 67.1(2)(c).