6 January 2010 External T.I. 2009-0333541E5 - Employer-Provided Meals or Allowances

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 certain employer provided amounts fit within the administrative guidelines for OT meal allowances and for allowances for travel within a municipality or metropolitan area as described in ITTN #40.

Position: Question of fact.

Reasons: Must be determined based on facts.

XXXXXXXXXX 							2009-033354
								Michael Cooke, C.A.

January 6, 2010

Dear XXXXXXXXXX :

Re: Employer-Provided Meals or Allowances

This is in response to your letter dated July 15, 2009, wherein you asked for clarification on the Canada Revenue Agency's ("CRA") administrative policy on employer-provided meals or allowances as described in Income Tax Technical News #40 (ITTN #40).

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 Canada Revenue Agency ("CRA") Tax Services Office. A list of TSOs is available on the "Contact Us" page of the CRA's website as well as copies of any publications mentioned herein. Notwithstanding the foregoing, we are prepared to offer the following comments.

By operation of paragraph 6(1)(a) of the Act, employees are generally taxable on the value of all benefits they receive by virtue of their employment. However, the courts and the CRA generally accept that when an amount is paid in respect of something that is primarily for the economic advantage or benefit of the employer, there is no taxable benefit to the employee and that a taxable benefit arises whenever the employee is the primary beneficiary of the economic advantage. It is the employer's responsibility to determine whether the primary beneficiary of the economic advantage is the employer or the employee.

Overtime Meal Allowances

As described in ITTN #40, effective for 2009 (i.e., starting January 1, 2009) where an employer provides overtime meals or an allowance for overtime meals to its employees the CRA will not assess a taxable benefit where all of the following conditions are met:

• The amount of the overtime meal allowance, or the cost of the meal, is reasonable;
• The employee works two or more hours of overtime right before or right after his or her scheduled hours of work; and
• The overtime is infrequent and occasional in nature.

For the purposes of this administrative policy the CRA will generally consider an amount not exceeding $17 as being reasonable. The CRA will also consider amounts exceeding $17 to be reasonable if the relative cost of obtaining meals in that particular location is higher, or there are other significant extenuating circumstances. However, if the amount paid by the employer does exceed $17 and is considered to be unreasonable in the circumstances, the full amount paid by the employer will be taxable.

As for the frequency of the overtime, the CRA generally considers overtime that occurs less than three times a week as being infrequent or occasional. This condition may also be met where the overtime occurs three or more times per week to meet certain temporary increased workload demands such as major repairs or for periodic financial reporting. The CRA has provided several examples on its website at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/mls/llwncxmpls-eng.html as to what it considers to be acceptable or unacceptable under this policy. What should be kept in mind is that if the overtime occurs on a frequent basis or becomes the norm, the CRA will consider the amount of any employer-paid overtime meals or overtime meal allowances to be a taxable benefit, since the amounts start to take on the characteristics of additional remuneration.

While a question of fact, in the two examples described in your letter, it appears that the overtime in both cases could be considered as being infrequent or occasional such that the overtime meal policy described above would apply providing the amounts paid by the employer are otherwise considered to be reasonable.

Municipality or Metropolitan Area

As also described in ITTN #40, in some situations, employer-provided allowances for items such as food or beverages in connection with an employee's travel within a municipality or a metropolitan area, can be excluded from the employee's income where:

• The amount is reasonable;
• The employer is the primary beneficiary of the allowance; and
• The amount does not seem to be an additional form of remuneration.

This means that an employer can exclude this type of travel allowance if its main reason is so that the employee's duties are completed in a more efficient way during a work shift. For the purposes of this administrative policy the CRA will generally consider the above-described overtime meal allowance limit to apply to the meal portion of any travel allowance. The CRA has also provided several examples for where this travel allowance policy will apply or not on its website at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/llwncs/trvlxmpls-eng.html.

In the example described in your letter, it appears that the meal allowances are being paid because the employees are not able to get home from work at their usual time. It does not appear that the meal allowances are being provided to allow the employees' duties of employment to be completed in a more efficient manner in the particular circumstances. On the assumption that this situation does not fall within the overtime meal policy, in our view, the amounts paid by the employer would be taxable.

We trust the above comments are of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch