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.
May 24, 2000
XXXXXXXXXX
Dear XXXXXXXXXX:
I am replying to your correspondence addressed to the Honourable Paul Martin, Minister of Finance, on behalf of your constituent, XXXXXXXXXX, concerning the definition of an allowance for purposes of the tax relief provided to employees at special or remote work sites. Mr. Martin sent me a copy of your correspondence on February 16, 2000.
I understand that Mr. Martin explained the provisions of the Income Tax Act which provide the above tax relief in respect of allowances for board, lodging and transportation, and sent you a copy of Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, which provides additional information on these provisions.
The term "allowance" is not defined in the Act. However, the courts have held that for tax purposes an allowance is an arbitrary amount in that it is a predetermined sum set without specific reference to any actual expense, it is usually for a specific purpose, and its use is within the discretion of the recipient such that the recipient is not required to account for the expenditure of the finds. The courts have also indicated that, although the allowance must be a predetermined amount set without specific reference to an actual expense, the sum may be determined with reference to a projected or average expense.
I would also note that for purposes of the tax relief provided to employees at special or remote work sites, there is also a requirement that the allowance must not exceed a reasonable amount. The reasonableness of an allowance is a question of fact. However, in order to be reasonable, an allowance would generally be related to the amount of actual expenses the employee is likely to incur in respect of the expenses for which the allowance is provided, rather than being based on other factors such as levels of salary. Therefore, an allowance which is expected to cover expenses in addition to board, lodging and transportation would not qualify for the above tax relief.
I trust that the information provided will assist you in responding to your constituent.
Yours sincerely,
Martin Cauchon
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