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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Inquiry concerning a letter dated August 14, 1998 from the CCRA to DFO with respect to the taxability of the value of meals and quarters received by an employee who is working on a ship that is in its home port and the employee is subject to a standby requirement of being available to return to the ship within one hour or less.
Position:
In general terms, it is the CCRA's position that a ship that is in its home port would not constitute a remote work location, and therefore the value of the meals and quarters received by the employee while in port would be a taxable benefit included in income pursuant to paragraph 6(1)(a). There are two exceptions to this general position - paragraph 4 of IT-254R2 and the CCRA letter to DFO.
Reasons:
The CCRA's letter to DFO was the result of the Tax Court of Canada case of Kevin Baker v The Queen. Employees must be in identical circumstances to Mr. Baker and governed by a collective agreement between the Treasury Board of Canada and the Merchant Service Guild for it to apply.
May 13, 2002
Mr. Rob McGregor HEADQUARTERS
Business Services Randy Hewlett, B.Comm.
Vancouver Tax Services Office 613-957-8973
2002-013772
Taxability of Meals & Quarters Aboard a Ship in its Home Port
We are writing in response to your inquiry of April 30, 2002, concerning a letter dated August 14, 1998 from the Canada Customs and Revenue Agency (CCRA) to the Department of Fisheries and Oceans (DFO) with respect to the above-noted issue.
The CCRA's letter to DFO indicates that for taxation years starting on January 1, 1998, meals and quarters are not taxable benefits when they are received by an employee who is working on a ship that is in its home port and the employee is subject to a standby requirement of being available to return to the ship within one hour or less. You inquire whether this is the CCRA's current position on the matter.
Paragraph 6(1)(a) of the Income Tax Act (the Act) requires a taxpayer to include in employment income for a taxation year the value of board and lodging received or enjoyed in the course of an office or employment. Interpretation Bulletin IT-254R2 Fishermen - Employees and Seafarers - Value of Rations and Quarters, dated May 26, 1980, outlines the CCRA's general position on exceptions to paragraph 6(1)(a) of the Act with respect to the taxability of the value of rations and quarters received by employees of a fishing vessel, or officers and crew of any vessel other than a fishing vessel.
As noted in Paragraph 3 of IT-254R2, a vessel or ship may qualify as a "remote work location" under subsection 6(6) of the Act when it is at sea for a period of not less than 36 hours and therefore, the value of meals and quarters may be excluded from the employees income where the other requirements of the provision are met. Conversely, a ship in its home port would not constitute a remote work location and the value of the meals and quarters received by the employee while in port would be a taxable benefit included in income pursuant to paragraph 6(1)(a) of the Act; but there are two exceptions to this position.
The first exception is discussed in paragraph 4 of IT-254R2. It applies where a ship may have returned to its home port after a voyage of less than 36 hours and the employee is required to remain on board because of special circumstances, such as:
? Quarantine;
? The need to await docking operations;
? The need to await immigration and customs clearance; or
? When the ship is in transit or loading or unloading cargo, and is in port for a very short time (a few hours or less) before it sails again.
Under these circumstances the value of meals and quarters while the ship is in its home port will be excluded from the employee's income.
The CCRA's letter to DFO provides the only other exception. The letter was the result of the Tax Court of Canada case of Kevin Baker v The Queen (97-1534(IT)G). Mr. Baker was an employee of DFO that worked on board a ship on the "lay day" system. As such, he worked for 28 days straight and then had 28 days off. During the 28 days of work, he could not leave the ship without the permission of the captain. When the ship was away from port, no amount was included as a taxable benefit for room and board in his income. However, for the 1994 taxation year, when the ship was in home port, his employer included a taxable benefit for the value of room and board on his 1994 T4 slip. The Minutes of Settlement of the case dated July 10, 1998, states the following:
Concerning employees whose terms and conditions are governed by a collective agreement between the Treasury Board of Canada and the Merchant Service Guild, the Minister of National Revenue will advise the Department of Fisheries and Oceans that, for taxation years starting on January 1, 1998, meals and quarters are not taxable benefits when they are received by an employee who is working on a ship that is in its home port, and the employee is subject to a standby requirement of being available to return to the ship within one hour or less.
As a result, the CCRA wrote the August 14, 1998 letter to DFO. It is the CCRA's position that for this exception to apply, employees must be in identical circumstances to Mr. Baker and be governed by a collective agreement between the Treasury Board of Canada and the Merchant Service Guild.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CCRA's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
John Oulton, CA
Manager
Individual and Business Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
- 3 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2002
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2002
Email this Content