22 September 2004 External T.I. 2004-0086611E5 - Employer-Paid Meal Allow. 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: Whether a daily allowance paid to an employed truck driver for meal and incidental expenses incurred while travelling away from home for seven-day periods is a taxable employment benefit, and whether the employer is entitled to deduct the entire amount it computing business income.

Position: Allowance would not likely be a taxable benefit, but the employer is restricted to a deduction for 50% of the portion of the allowance representing meals.

Reasons: Subparagraph 6(1)(b)(vii) would likely exclude the allowance from the employee's income. Subsection 67.1(1) would restrict the deduction for the meal portion of the allowance since none of the exceptions in 67.1(2) apply in respect of the allowance that is excluded from an employee's income under subparagraph 6(1)(b)(vii).

Randy Hewlett, B.Comm.

XXXXXXXXXX 613-957-8973
2004-008661
September 22 2004

Dear XXXXXXXXXX:

Re: Employer-Paid Meal Allowances To Truck Drivers

We are writing in response to your letter of July 16, 2004, wherein you asked for our opinion on the above-noted issue.

Your letter indicated that the company is considering paying a $45 daily allowance to you and another individual who is also employed by the company as a truck driver, for meal and incidental expenses incurred while travelling away from home for seven-day periods. You inquired whether the allowance would be considered a taxable employment benefit and whether the company would be entitled to deduct the entire amount it computing its business income.

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 aspect of your inquiry.

(a) Taxable Employment Benefit

Paragraph 6(1)(b) of the Income Tax Act (the "Act") generally includes in a taxpayer's employment income all amounts received as an allowance for personal or living expenses. There are exceptions to the inclusion of certain allowances in employment income where the amounts are paid in respect of travelling in the course of employment. For example, subparagraph 6(1)(b)(vii) of the Act excludes from employment income a reasonable allowance paid to an employee in respect of employment-related travel expenses incurred while travelling away from the municipality and the metropolitan area where the employer's establishment is located, at which location the employee ordinarily worked or to which the employee ordinarily reported to work. In our view, this exception would likely apply in the circumstances described in your letter such that the allowance may not have to be included in employment income.

(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 this 50% limitation contained in subsection 67.1(2) of the Act. We would note, however, that these exceptions do not apply in respect of an allowance that is excluded from an individual's income under subparagraph 6(1)(b)(vii) of the Act. Therefore, in terms of an allowance such as that described in your letter, we are of the view that the deductibility of the portion that relates to meals is restricted to 50% of the amount paid or payable. The 50% limitation on deductibility would not apply to the incidental expense portion of the allowance.

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