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:
1. Can paragraph 67.1(2)(f) apply to a special event that is also attended by clients?
2. Does the answer change if there are more clients than employees in attendance?
3. What is an acceptable method of allocating the costs?
Position TAKEN:
1. Yes.
2. Question of fact.
3. General information provided.
Reasons:
1. Wording of paragraph 67.1(2)(f) does not restrict special events to employees-only events.
2. Question of fact.
3. Question of fact.
XXXXXXXXXX 2003-003997
T. Young, CA
December 4, 2003
Dear XXXXXXXXXX:
Re: Food, Beverages and Entertainment Expenses
We are writing in response to your email of September 22, 2003, concerning the application of section 67.1 of the Income Tax Act (the "Act").
In your letter, you asked the following questions:
1. Assume that a corporation holds a special event that may be attended by all of its employees at its particular location as well as some of its clients. Do the meals and entertainment costs that pertain to the employees get exempted from subsection 67.1(1) of the Act by virtue of paragraph 67.1(2)(f)?
2. Does our answer change if the majority of the attendees will be clients rather than employees, notwithstanding that all of the employees of the employer have been invited to the special event?
3. If the costs cannot be readily segregated between the employee attendees and the client attendees, would an apportionment based on the number of invited guests be satisfactory? Alternatively could the apportionment be based on the number of confirmed employees attending the event to the total number of confirmed attendees be satisfactory?
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to provide the following comments, which may be of assistance to you.
1. It is our view that, while it must be generally available to all employees at a particular place of business, it is not necessary that a special event be restricted to employees and their families in order for paragraph 67.1(2)(f) to apply to the amounts that pertain to the employees.
2. Provided that the special event is available to all employees at a particular place of business, the fact that there may be more clients than employees in attendance does not, in itself, mean that paragraph 67.1(2)(f) would not apply.
3. It is the employer's responsibility to show which expenses are subject to the exemption in paragraph 67.1(2)(f). In cases where the expenses are not specifically identified as being made in respect of the employees, the employer will need to use a reasonable method of allocating the expenses. Since the paragraph is applicable to the "food, beverages or entertainment ... consumed or enjoyed" by the individuals employed, a method of allocation based on the number of employees who actually attended, as opposed to the number who were invited, would seem to be the most appropriate.
We trust our comments will be of assistance to you. If you have any further questions or if you need assistance in determining if paragraph 67.1(2)(f) applies to a particular situation, please contact the Client Services Division of your local Tax Services Office.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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