10 September 2002 External T.I. 2002-0158405 - REIMBURSEMENT OF CHILD CARE EXPENSES

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: Whether the reimbursement of child care expenses would constitute a taxable employment benefit

Position: Yes, unless the reimbursement relates to additional child care costs incurred due to a requirement to travel on employment-related business.

Reasons: The reimbursement of child care expenses would normally be a taxable benefit. There is an exception where the employee is reimbursed for additional child care costs incurred as a result of a requirement to travel out of town on employment-related business.

2002-015840
XXXXXXXXXX W. Antle
(613) 957-2102
September 10, 2002

Dear XXXXXXXXXX:

Re: Reimbursement of Child Care Expenses

This is further to your letter of August 19, 2002, concerning whether the reimbursement of child care expenses by an employer would be considered a taxable employment benefit.

XXXXXXXXXX redeployed some of its management employees to various locations throughout the province to fill vacancies left by XXXXXXXXXX employees. Some of the employees who were redeployed incurred additional child care expenses, which were reimbursed by the employer. You are asking whether this reimbursement would constitute a taxable employment benefit to the employees.

Our Comments

Paragraph 6(1)(a) of the Income Tax Act (the "Act") includes in an employee's income the value of any benefit received or enjoyed by the employee in respect of his or her employment. It is our view that, where an employer reimburses an employee for the cost of a personal expense incurred by the employee, or where such an expense is paid directly by their employer, then the employee will normally be considered to have received a taxable employment benefit. Accordingly, payments made by an employer to cover the cost of child care expenses incurred by an employee would generally constitute a taxable employment benefit to the employee.

The Canada Customs and Revenue Agency ("CCRA") has a longstanding administrative position that provides an exception to this general position. Where additional child care expenses are incurred because an employee is required by the employer to travel out of town on employment-related business, then the reimbursement of these additional child care costs will not be considered a taxable employment benefit.

With respect to the situation outlined in your letter, the reimbursement of additional child care costs would not be considered a taxable employment benefit if these additional costs were incurred by the employees to enable them to undertake required employment-related travel away from the municipality, and metropolitan area if there is one, where the employee's regular work place is located. In any other case, the reimbursement of the child care costs would be considered a taxable employment benefit to the employees.

We trust that our comments will be of assistance.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

- 2 -