9 February 1994 Internal T.I. 9335877 F - Clothing Allowance

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.

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Attention:  XXXXXXXXXX

Clothing Allowance

We are writing in reply to your memorandum of December 8, 1993 regarding the taxability of a clothing allowance.

More specifically, you have asked whether or not the clothing allowance paid by XXXXXXXXXX in accordance with their union contract is taxable in light of the decision of the Federal Court of Appeal in the Queen v. Glenford R. Huffman 90 DTC 6405. You have also asked us to review whether or not the items used in the course of the crewmember's duties such as oil clothes, rubber boots, gloves, etc., could be considered supplies and thus deductible under subparagraph 8(1)(i)(iii) of the Income Tax Act (the Act) in the event that we determine the clothing allowance to be taxable.

In your memorandum you have provided a copy of the particular clause in the union contract that outlines the specific details regarding the clothing allowance i.e., basic criteria which must be met by the crewmembers in order to qualify for receipt of the allowance, the date of payment of the allowance and the per diem rate to calculate the amount of the allowance. The employer has also provided a general description of what items the clothing allowance is intended to reimburse/purchase.

We are unable to determine, given the information provided, whether or not the clothing allowance is taxable; however, we are able to provide some comments which should enable you to make that determination upon a review of the facts of the situation. In addition, we have some comments regarding the deductibility of certain items under subparagraph 8(1)(i)(iii) of the Act.

Our Comments:

The Huffman case dealt with a reimbursement of costs incurred by the taxpayer in acquiring special clothing required for use on the job. It is the Department's opinion that in order to fall under the same tax treatment, one must meet the same factual situation. This is not the situation for these crewmembers. More importantly, what arose out of the Huffman case was the Department's decision, in order to avoid unfairness, to consider that the same tax treatment should be applied to all amounts received by an employee to subsidize his uniform (or special clothing) whether on an allowance basis or a reimbursement basis. However, this is based on the assumption that the allowance is indeed spent for such clothing. If, in a taxation year a particular employee has not expended the allowance on such clothing, then the relevant amount would be required to be included in computing that employee's income from employment.

It is our opinion that an employee would not be considered to be in receipt of a taxable benefit with respect to special or protective clothing (including safety footwear) which, by reason of the hazards inherent in the employment duties or by a law of a province or Canada, the employee is required to wear, where the employer provides the employee with a clothing allowance, to the extent the allowance is expended on such special or protective clothing.

Generally, subject to certification, subparagraph 8(1)(i)(iii) of the Act enables a taxpayer to deduct from income for a taxation year from an office or employment the "cost of supplies that were consumed directly in the performance of the duties of his office or employment...". Paragraph 1 of Interpretation Bulletin 352R:

Employees' Expenses Incurred in Performing Duties of Office or Employment outlines the requirements which must be met and further discusses the issue of whether the requirement to pay for the supplies must be included in the contract of employment or may be implied. This will be a question of fact and can only be determined through a review of all the circumstances in each case.

It should also be noted that the Act states that this deduction may only be claimed with respect to the cost of "supplies that were consumed". The extent of this limitation is explained in paragraph 4 of the same bulletin.

The word "supplies" as used in subparagraph 8(1)(i)(iii) is limited to materials that are used up directly in the performance of the duties of the employment. It will usually include such items as the cost of gasoline and oil used in the operation of power saws owned by employees in woods operations, dynamite used by miners, bandages and medicines used by salaried doctors and various stationery items (other than books) such as pens, pencils, paper clips, charts, etc,, used by teachers, However, it will not include special clothing customarily worn or required to be worn by employees in the performance of their duties and any types of tools which generally fall into the category of equipment.

Subsection 8(10) of the Act outlines the requirement that, in order for an amount to be deductible under subparagraph 8(1)(i)(ii) of the Act, a prescribed form signed by the taxpayer's employer which certifies that the conditions in that subparagraph were met in the year by the taxpayer must be filed with the income tax return of the taxpayer. It is our opinion that the provisions of subparagraph 8(1)(i)(iii) of the Act are sufficiently broad to allow a deduction for the purchase of the knife (used for shucking scallops), provided that it can be shown that they have a relatively short life span and small cost. It is our belief that the special clothing would not be deductible under this provision.

We trust our comments will be of assistance to you.

P.D. FuocoSection ChiefPersonal and General SectionBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c.      Source Deductions Division