7 May 2004 Internal T.I. 2004-0073411I7 - Employer-Provided Meals:Benefits&Deductibility

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: In several examples where a trucking company pays for the meals of truck drivers who travel on in-town and out-of-town trips, whether the employees are required to include the value of the meals in income as a taxable benefit under paragraph 6(1)(a) of the Act and whether the employer's deduction is restricted under subsection 67.1(1).

Position: (A) On in-town trips there is a taxable benefit to the employees and the employer's deduction is not restricted. (B) On out-of-town trips there is no taxable benefit to the employees and the employer's deduction is restricted.

Reasons: (A) On in-town trips, the employer is paying for the meal expenses of employees who are not traveling away from the municipality and the metropolitan area where the employer's establishment is located at which they ordinarily report to work. Consequently, the employees are in receipt of a taxable benefit under paragraph 6(1)(a) of the Act for the value of the meals. Because the employees are required to include the value of the meals in their income under section 6 of the Act, the exception in paragraph 67.1(2)(d) applies and therefore, subsection 67.1(1) will not restrict the employer's deduction. (B) On out-of-town trips, the employees are not in receipt of a taxable benefit. The amounts received or benefits enjoyed by the employees in respect of the employer-provided meals are not required to be included in computing their income under paragraph 6(1)(a) of the Act because the expenses are incurred while they are travelling in the course of employment away from the municipality and the metropolitan area where the employer's establishment is located at which they ordinarily reported to work. The employer's deduction is restricted under subsection 67.1(1) of the Act to 50% of the amount paid. The exceptions in paragraphs 67.1(2)(d) and (e) of the Act are not applicable. For these exceptions to apply, the meals paid for by the employer would have to be excluded from the employees' income because of the special work site or remote work location exclusion in subsection 6(6) of the Act. The meals are not excluded from the employees' income because of subsection 6(6) of the Act, but are excluded based on what constitutes a benefit for purposes of paragraph 6(1)(a).

 		May 7, 2004

Mr. Tony Horwood	HEADQUARTERS
	Newfoundland and Labrador	Randy Hewlett, B.Comm.
	   Tax Services Office	613-957-8973

		2004-007341

Employer-Provided Meals: Employee Benefits and Employer Deductibility

We are writing in response to your request for our opinion on the above-noted issue.

We outline below a summary of the examples referred to in your request, followed by your opinion and our comments. In the examples, a trucking company (the "Employer") pays for the meals of truck drivers (the "Employees") who travel on "in-town" and "out-of-town" trips. You inquired whether the Employees are required to include the value of the meals in income as a taxable benefit under paragraph 6(1)(a) of the Income Tax Act (the "Act") and whether the Employer's deduction is restricted under subsection 67.1(1). In the examples, a reference to when the Employees are in-town (or out-of-town) means that they are working in (or away from) the municipality and the metropolitan area where the Employer's establishment is located at which they ordinarily report to work.

Example 1

Example 1: The Employer pays for meal expenses incurred while the Employees are on in-town trips. In your view, the value of the meals is required to be included in the Employees' income under paragraph 6(1)(a) of the Act because the expenses are personal in nature. It is also your view that the Employer's deduction is not restricted under subsection 67.1(1) of the Act because the exception in paragraph 67.1(2)(d) applies.

We agree with your view in Example 1.

Examples 2, 3 and 4

Example 2: The Employer pays or reimburses the Employees for meal expenses incurred while they are on out-of-town trips that do not require an overnight stay. In your view, the value of the meals is required to be included in the Employees' income under paragraph 6(1)(a) of the Act because they are personal in nature. Further, subsection 6(6) of the Act does not apply since the period the Employees are out-of-town is less than 36 hours. It is also your view that the Employer's deduction is not restricted under subsection 67.1(1) of the Act because the exception in paragraph 67.1(2)(d) applies.

Example 3: Same as Example 2, except an overnight stay is required. In your view, the value of the meals is not required to be included in the Employees' income pursuant to subsection 6(6) of the Act where they are required to be out-of-town for 36 hours or more. You indicated that in this example, the out-of-town location is outside an urban area that has a population of at least 40,000 individuals and is at least 30 kilometers from the nearest point on the boundary of the nearest such urban area. Therefore, it is also your view that the Employer's deduction is not restricted under subsection 67.1(1) of the Act because the exception in paragraph 67.1(2)(e) applies.

Example 4: Same as Example 3, except the out-of-town location is not outside an urban area. In your view, the value of the meals is not required to be included in the Employees income pursuant to subsection 6(6) of the Act where they are required to be out-of-town for 36 hours or more. It is also your view that the exception in paragraph 67.1(2)(e) of the Act does not apply and the Employer's deduction is restricted under subsection 67.1(1).

In our view, the Employees are not in receipt of a taxable employment benefit in Examples 2, 3 and 4. Amounts received or benefits enjoyed by an employee in respect of employer-provided meals are not required to be included in computing the employee's income under paragraph 6(1)(a) of the Act where the expenses are incurred while the employee is travelling in the course of carrying out the duties of employment while away from the municipality and the metropolitan area where the employer's establishment is located, at which the employee ordinarily worked or to which the employee ordinarily reported to work. In these three examples, the Employees are travelling in the course of employment away from the municipality and the metropolitan area where the Employer's establishment is located at which they ordinarily report to work.

It is also our view in Examples 2, 3 and 4 that the Employer's deduction is restricted under subsection 67.1(1) of the Act to 50% of the amount paid. In our view, the exceptions in paragraphs 67.1(2)(d) and (e) of the Act are not applicable. For these exceptions to apply, the meals paid for by the Employer would have to be excluded from the Employees' income because of the special work site or remote work location exclusion in subsection 6(6) of the Act. The meals are not excluded from the Employees' income because of subsection 6(6) of the Act, but are excluded because they do not constitute a taxable employment benefit for purposes of paragraph 6(1)(a) of the Act. In other words, these types of employment-related travel expenses do not trigger a taxable employment benefit.

We trust our comments are of assistance. Should you have any questions please contact the writer at the telephone number indicated above.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the CRA'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. Requests for this latter version should be made by you to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.

Randy Hewlett, B. Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch