29 June 1995 Internal T.I. 9511147 - TAXABLE BENEFITS AND ALLOWANCES - CLEANING

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

	whether a non-accountable allowance in respect of 	uniform laundering and maintenance is required to be 	included in income.

Position TAKEN:

	Only to the extent that the allowance is not expended 	for the purposes it was provided.

Reasons FOR POSITION TAKEN:

	As a result of the decision in Huffman v. the Queen, the 	non-taxability of reimbursement for this purpose has 	been extended to non-accountable allowances, but only to 	the extent that the allowance was spent for the purpose 	given.

		June 29, 1995

	Vancouver Tax Services	HEADQUARTERS
J. A. Szeszycki
	Attention: Beth McKernan	(613) 957-8953

		951114

Cleaning Allowances

This is in reply to your memorandum of March 24, 1995 to which you attached an enquiry from the representative of the XXXXXXXXXX requesting clarification as to the taxability of non-accountable cleaning allowances provided to certain members. We regret our delay in responding.

It is our understanding of the enquiry that certain members of the XXXXXXXXXX are designated to wear uniforms while performing the duties of their employment. The uniform is provided to them by their employer. In addition, under a typical agreement, the employer may arrange for the cleaning, laundering and repair of the uniforms as required or provide a non-accountable allowance of $XXXXXXXXXX per month for the same purpose. The amount stipulated in the agreement is an amount considered reasonable by both parties to the agreement.

Generally, any amount received in the year by an employee as an allowance in respect of personal or living expenses, or for any other purpose, is required to be included in income pursuant to paragraph 6(1)(b) of the Income Tax Act, unless it is an allowance described in any of the exceptions listed in subparagraphs (i) to (xi). A non-accountable allowance for the laundering or repair of clothing is not among the exceptions listed.

Interpretation Bulletin IT-470R "Employees' Fringe Benefits" at paragraphs 29 and 30 set out the Department's position that the supply of uniforms or special clothing to an employee as well as the laundering of those items of clothing would not constitute a taxable benefit in the hands of the employee. The bulletin extends that tax treatment to situations where the employee undertakes to purchase the uniform, or to have it cleaned, and is reimbursed by the employer upon presentation of receipts.

The precedent-setting Federal Court of Appeal decision in The Queen v. Huffman 90 DTC 6405 effectively extended the same tax treatment to circumstances where the employer supplies the special clothing or provides for its cleaning on a reasonable non-accountable allowance basis. As a result, the Department's position, although not yet updated in IT-470R, is that a reasonable allowance in respect of dry cleaning and uniform maintenance will not constitute a taxable benefit to the extent that it is actually expended for that purpose.

P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c. A. Bissonnette - Headquarters, Trust Accounts Division