8 November 2005 External T.I. 2005-0143851E5 - Information Returns under Regulation 237

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: (1) Whether a reimbursement or allowance in lieu of reimbursement paid to an individual for services rendered without remuneration constitutes an amount received in the course of earning income from a business or property pursuant to paragraph 12(1)(x), and (2) whether an information return pursuant to Regulation 237 is required for such payments.

Position: (1) No. (2) No.

Reasons: Where an individual provides services, whether pursuant to a contract for services or not, but receives no remuneration for such services, there is no source of income from a business or property. Therefore, it follows that any reimbursement or allowance for reasonable accommodation and travel expenses, meals or XXXXXXXXXX associated with the provision of such services is not received in the course of earning income from a business or property. As a consequence, such amounts are not included in income pursuant to paragraph 12(1)(x) and an information return in respect of such amounts need not be filed.

2005-014385
XXXXXXXXXX T. Lanzer
(613) 957-2129
November 8, 2005

Dear XXXXXXXXXX:

Re: Information Returns under Regulation 237

We are writing in response to your letter of July 22, 2005 concerning the filing of information returns by the XXXXXXXXXX under section 237 of the Income Tax Regulations (the "Regulations") in respect of reimbursements and allowances in lieu of reimbursements paid to individuals who receive no other remuneration from XXXXXXXXXX for services rendered.

Background

1. XXXXXXXXXX avails itself of the services of many individuals to assist in the delivery of its mandate. There are three general categories of individuals:

(a) volunteers;

(b) individuals who provide a service to XXXXXXXXXX under contract (written or verbal) for no remuneration; and

(c) individuals who are appointed to XXXXXXXXXX position with no remuneration.

While none of these types of individuals receive any remuneration, it is possible that they may be presented with a gift in recognition of service to XXXXXXXXXX.

2. An individual could receive reimbursements of expenditures for costs originally incurred by them. Payment by XXXXXXXXXX occurs after the individual submits a claim with original receipts. Normally, the following types of expenses are involved:

(a) accommodations, in accordance with the XXXXXXXXXX (e.g. commercial or private residence);

(b) meal expenses, in accordance with the XXXXXXXXXX;

(c) transportation expenses, in accordance with the XXXXXXXXXX (e.g. air travel, train, bus, taxi, personal automobile);

(d) XXXXXXXXXX; and/or

(e) incidental costs, in accordance with the XXXXXXXXXX (e.g. telephone).

3. For the following types of expenses, an individual could receive a per diem allowance, in accordance with the XXXXXXXXXX, in lieu of submitting a claim with original receipts:

(a) meals;

(b) incidentals; and

(c) XXXXXXXXXX.

In the case of meals and XXXXXXXXXX, it is also possible that the meals or XXXXXXXXXX would be purchased by XXXXXXXXXX and provided to the individual.

You are seeking to clarify whether XXXXXXXXXX is required to file an information return with the CRA reporting the reimbursements and allowances described above. Specifically, is XXXXXXXXXX required to report these types of payments on Form T1204 for each category of individual. In your view, this question relates to the interpretation of paragraph 12(1)(x) of the Income Tax Act (the "Act") regarding inducements, reimbursements, etc. and whether or not these individuals are considered to be earning income from a business or property when they are not receiving any remuneration from XXXXXXXXXX for services rendered to XXXXXXXXXX.

Our Comments

Paragraph 12(1)(x) provides that a taxpayer's income includes any amount received in the course of earning income from a business or property from a government where the amount can reasonably be considered to have been received:

(iii) as an inducement, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of inducement, or

(iv) as a refund, reimbursement, contribution or allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, in respect of

(A) an amount included in, or deducted as, the cost of property, or

(B) as an outlay or expense,

Where an individual provides services, whether pursuant to a contract for services or not, but receives no remuneration for such services, there is no source of income from a business or property. Therefore, it follows that any reimbursement or allowance for reasonable accommodation and travel expenses, meals or XXXXXXXXXX associated with the provision of such services is not received in the course of earning income from a business or property. As a consequence, it is our view that such amounts are not included in the individual's income pursuant to paragraph 12(1)(x).

With respect to whether XXXXXXXXXX is required to file an information return in respect of such reimbursements and allowances, subsection 200(1) of the Regulations provides the following:

Every person who makes a payment described in subsection 153(1) of the Act (other than an annuity payment in respect of an interest in an annuity contract to which subsection 201(5) applies) shall make an information return in prescribed form in respect of the payment unless an information return in respect of the payment has been made under sections 202, 214, 237 or 238.

Paragraph 153(1)(g) of the Act refers to every person paying at any time in a taxation year fees, commissions or other amounts for services.

Subsection 237(2) of the Regulations provides the following:

A federal body that pays or credits an amount to a payee shall file an information return in prescribed form in respect of the amount on or before March 31 in each year in respect of the preceding calendar year.

As defined in subsection 237(1) of the Regulations, a "payee" means a person or partnership to whom an amount is paid or credited in respect of goods for sale or lease, or services rendered, by or on behalf of the person or the partnership.

The determination of whether the amounts paid by XXXXXXXXXX are in respect of a contract for services is a question of fact that can only be determined by reviewing the facts in the particular circumstances. Where it is determined that XXXXXXXXXX and the payee have entered into a contract for services, any amounts paid for such services, whether paid directly or indirectly, that are received by the payee must be reported in an information return pursuant to subsection 200(1) or 237(2) of the Regulations.

Where an individual payee receives no remuneration for services provided and is simply reimbursed or paid an allowance for reasonable accommodation, travel and meal expenses, or is being reimbursed for or provided with XXXXXXXXXX, it is our view that XXXXXXXXXX would not be required to file an information return in respect of such reimbursements, allowances or clothing.

Yours truly,

for Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Planning Branch

??