11 December 2000 External T.I. 2000-0018495 - MEAL EXPENSES FOR TRANS. EMPLOYEES

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.

Principal Issues:

Whether employees of a company that transports passengers can claim a deduction under paragraph 8(1)(g) of the Act.

Position:

No

Reasons:

Consistent with case law and prior positions.

XXXXXXXXXX 	2000-001849
		Cornelis Rystenbil, CGA
Attention:  XXXXXXXXXX 

December 11, 2000

Dear Sir:

Re: Definition of municipality for purposes of
Paragraph 8(1)(g) of the Income Tax Act (the "Act")

This is in reply to your letter of April 4, 2000 in which you requested our view on your position that a municipality and metropolitan area would not extend from XXXXXXXXXX to locations located in XXXXXXXXXX. You described a situation where a company is in the business of transporting passengers between XXXXXXXXXX Each town has its own home terminal and the employee is required to travel from his home terminal to another terminal.

Since your enquiry appears to relate to actual taxpayers and completed transactions that would ordinarily be considered by a local Tax Services Office, we are unable to comment on the specifics of your particular situation. We are, however, prepared to offer the following general comments on the issues raised in your letter.

Our Comments

Under paragraph 8(1)(g) of the Act, an employee who works for an employer whose principal business is the transportation of passengers, goods, or both, may be entitled to a deduction for meals and lodging. Individuals must satisfy the following conditions to be able to claim meals and lodging expenses. They must travel away from the municipality and its metropolitan area, if there is one, and while away, they must make disbursements for meals and lodging. If they do not meet one of these two conditions, they are not entitled to deduct meals and lodging expenses.

The courts have looked at this deduction a number of times. In an excerpt from Derrien v. M.N.R. (80 DTC 1951), M. J. Bonner, a member of the Tax Review Board, provides us with the context of paragraph 8(1)(g) of the Act. Mr. Bonner's words are reiterated in Kraushar v. M.N.R., 86 DTC 1210 (T.C.C.) and in MacDonald v. The Queen, [1995] T.C.J. No. 1084 (T.C.C.):

"In my view the solution becomes apparent when paragraph 8(1)(g) is read as a whole within its statutory context. The approach of the Income Tax Act to deductions from salary or wages in the process of computing income from office or employment is generally restrictive. In this regard, reference should be made to subsection 8(2) of the Act. The exceptions in subsection 8(1) are not to be regarded as having been inserted capriciously. The exception made for transport employees by paragraph 8(1)(g) recognizes that the nature of the work often involves substantial trips away from the area where such employees live and report for work. Such trips impose a burden of expense for meals and lodging not borne by the ordinary worker who can sleep and eat, at least most of the time, at home. The 'while so away' qualification and the use of the word 'and' in the phrase 'disbursements for meals and lodging' tend to support this conclusion. The cost to the ordinary worker of food and shelter is a personal expense. The cost to a transport worker of meals and lodging necessitated by travel in the course of his duties is much more directly related to the income earning process.

When paragraph 8(1)(g) is read as a whole within its context it will be seen that some of the dictionary definitions of 'travel', such as 'to go from one place to another', are inappropriate. When paragraph 8(1)(g) refers to travelling away from a municipality and its metropolitan area it contemplates journeys of such substantial distance and duration as to require disbursements for both meals and lodging. It does not encompass all cases in which a taxpayer goes from a place inside the metropolitan area to a place just outside it.

In this case the Appellant's claim was limited to disbursements for meals alone. It is unnecessary to decide whether the Appellant's trips took him beyond the boundary of the metropolitan area in which Sea Island is located. The trips could not be said to involve travel away from that metropolitan area within the meaning of paragraph 8(1)(g). The appeal is therefore dismissed."

Although the courts have indicated that paragraph 8(1)(g) contemplates journeys of substantive duration, the Canada Customs and Revenue Agency (CCRA) has allowed the deduction of meal expenses incurred after every four hours from the employee's check-out time to a maximum of three meals a day. The check-out time is normally considered to be the time the employee leaves the last stop within the municipality or the metropolitan area.

Since the company's terminals appear to be within 1.5 hours from the last stop within the municipality or the metropolitan area, the employees likely would not be able to claim a deduction under paragraph 8(1)(g) of the Act. Given the Court's views expressed above, we believe that the CCRA's current position for meals expenses is a liberal interpretation of paragraph 8(1)(g) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate

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