26 March 2004 External T.I. 2004-0061281E5 - Employer Paid Meal Allowances To Truck Drivers

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.

Principal Issues: (a) Whether daily allowances paid by an employer to individuals employed as truck drivers for meal expenses incurred while travelling in the course of employment, is exempt from inclusion in income under subsection 6(6) of the Act where they are required to travel away from their permanent residences for more than 36 hours. In other words, is the truck considered a special work site or remote work location? (b) Whether the employer's deduction for the meal allowances is restricted to 50% of the amounts paid because of subsection 67.1(1) of the Act?

Position: (a) No, however, subparagraph 6(1)(b)(vii) may apply. (b) No.

Reasons: (a) In the context of subsection 6(6) of the Act, a special work site or remote work location refers to a geographic location at which the employee regularly reports to work to perform the duties of employment. A truck cannot be a special work site or remote work location. (b) There are exceptions to the application of subsection 67.1(1) of the Act contained in subsection 67.1(2), including exceptions that may apply in respect of certain amounts that would otherwise be included in computing an individual's employment income but for subsection 6(6) of the Act; however, there is no exception for allowances that are excluded from an individual's employment income under subparagraph 6(1)(b)(vii1).

Randy Hewlett, B.Comm.

XXXXXXXXXX 613-957-8973
2004-006128
March 26, 2004

Dear XXXXXXXXXX:

Re: Employer-Paid Meal Allowances To Truck Drivers

We are writing in response to your e-mail of February 10, 2003, wherein you asked for our opinion on the above-noted issue.

You indicated that your company pays daily allowances to individuals employed as truck drivers for meal expenses incurred while travelling in the course of employment. Since these employees are often required to be away from their permanent residences for more than 36 hours, you inquired whether the trucks could be considered remote work locations and therefore, the allowances exempt from inclusion in employment income under subsection 6(6) of the Income Tax Act (the "Act"). You also inquired whether your company's deduction for the meal allowances would be restricted to 50% of the amounts paid because of subsection 67.1(1) of the Act.

Our Comments

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 income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments on each of your inquires with respect to the meal allowances.

(a) Exclusion From Employment Income

Subsection 6(6) of the Act exempts from inclusion in an individual's employment income the value of (or an allowance received in respect of) certain expenses incurred for board and lodging at a particular location which is considered a "special work site" or "remote work location". Where a particular location is a special work site or remote work location under the provisions of subsection 6(6) of the Act, certain transportation benefits or allowances are also excluded from inclusion in the individual's employment income.

For purposes of subsection 6(6) of the Act, we are of the view that the "location" of a special work site or remote work location refers to a geographic location at which the employee regularly reports to work to perform the duties of employment. As such, a truck cannot be a special work site or remote work location. Consequently, subsection 6(6) of the Act will not apply to exclude from income the meal allowances your company pays to its truck drivers.

While subsection 6(6) of the Act does not apply in the situation outlined, we are of the view that the meal allowances may be excluded from inclusion in the truck drivers' employment income by virtue of subparagraph 6(1)(b)(vii). This provision generally excludes from income reasonable allowances paid to employees in respect of employment-related travel expenses incurred while travelling away from the municipality and the metropolitan area where the employer's establishment, at which the employee ordinarily worked or to which the employee ordinarily reported, is located.

(b) Employer Deductibility

Subsection 67.1(1) of the Act provides that an otherwise deductible amount paid or payable in respect of the human consumption of food or beverages or the enjoyment of entertainment is restricted to 50% of the lesser of the amount actually paid or payable and an amount that is reasonable in the circumstances. There are exceptions to the application of subsection 67.1(1) of the Act contained in subsection 67.1(2), including exceptions that may apply in respect of certain amounts that would otherwise be included in computing an individual's employment income but for the special work site and remote work location exemption in subsection 6(6) of the Act. Subsection 67.1(2) of the Act, however, does not contain an exception to the application of the 50% limitation to allowances that are exempt from inclusion in an individual's employment income because of subparagraph 6(1)(b)(vii). Therefore, we are of the view that the deductibility of the allowances your company provides to the truck drivers is subject to the 50% limitation in subsection 67.1(1) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

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