16 November 1995 Internal T.I. 9524257 - EMPLOYMENT EXPENSES

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 or not, where a taxpayer meets the requirements of paragraph 8(1)(g) of the Act and will be entitled to an employment expense deduction the amount of both a taxable and non-taxable allowance must be deducted to arrive at the amount of the deduction.

Position TAKEN:

The taxpayer would be required to deduct the amount of the non-taxable allowance from his employment expense deduction but would not be required to deduct the amount of the taxable allowance which has been included in his income.

Reasons FOR POSITION TAKEN:

Given the manner in which the non-taxable allowance was calculated, we have made the assumption that the employer determined that this amount should be considered non-taxable by virtue of subparagraph 6(1)(b)(vii) of the Act. The fact that the allowance was calculated as a fixed amount based on time away from the home terminal does not change its character, in that it was intended to reimburse the employee when on special work assignments for specific travel expenses he incurred in the performance of his duties of employment away from the municipality at which he ordinarily worked and the metropolitan area where the employer's establishment was located. This amount should be deducted from the expenses claimed pursuant to paragraph 8(1)(g) of the Act.

The taxable allowance, equivalent to 4% of the employee's gross income was received pursuant to the collective agreement and categorized as a "meal allowance". In contrast to the non-taxable allowance received by the employee, this taxable allowance was not intended to reimburse him for specific travel expenses (e.g. special work travel expenses) incurred in the performance of his duties of employment but was an arbitrary amount based on his remuneration. Accordingly, this amount is included in income by virtue of 6(1)(b) of the Act and the amount of this allowance would not be deducted from the employee's claim for employment expenses pursuant to paragraph 8(1)(g) of the Act.

			November 16, 1995

	SURREY TAX CENTRE	HEADQUARTERS
	Enquiries and Adjustments Division	D. Zion
	T1 Client Services	(613) 957-8953

	Attention:  Lynn Walker
			952425

XXXXXXXXXX
1994 Employment Expenses

This is in reply to your memorandum of September 12, 1995 wherein you have requested our assistance with respect to the determination of the amount which XXXXXXXXXX may claim as an employment expense for the 1994 taxation year.

The situation, as we understand it, is as follows:

XXXXXXXXXX

XXXXXXXXXX

Our Comments

Paragraph 6(1)(b) of the Act requires all allowances to be brought into income in the year received for personal or living expenses or as an allowance for any purpose to the extent that they are not described within the exceptions set out in subparagraphs (i) to (xi) thereof. Allowances that are not described in the exceptions are subject to tax unless specifically exempted by some other provision of the Act such as subsection 6(6) of the Act. XXXXXXXXXX employer has determined that he received a non-taxable allowance of $XXXXXXXXXX in 1994 (item 4(b) above). Given the manner in which the non-taxable allowance was calculated, we have made the assumption that the employer determined that this amount should be considered non-taxable by virtue of subparagraph 6(1)(b)(vii) of the Act. The fact that the allowance was calculated as a fixed amount based on time away from the home terminal does not change its character, in that it was intended to reimburse XXXXXXXXXX when on special work assignments for specific travel expenses he incurred in the performance of his duties of employment away from the municipality at which he ordinarily worked and the metropolitan area where the employer's establishment was located. In our view, this amount should be deducted from the expenses claimed by XXXXXXXXXX pursuant to paragraph 8(1)(g) of the Act.

XXXXXXXXXX also received a taxable allowance of $XXXXXXXXXX which, pursuant to the collective agreement, was categorized as a "meal allowance". This amount was the equivalent of 4% of his gross income. In contrast to the non-taxable allowance received by XXXXXXXXXX this taxable allowance was not intended to reimburse him for specific travel expenses (e.g. special work travel expenses) incurred in the performance of his duties of employment but was an arbitrary amount based on his remuneration. Accordingly, this amount is included in income by virtue of 6(1)(b) of the Act and would not be considered to be an amount intended to reimburse the taxpayer in the year for specific disbursements for meals and lodging while away from the municipality and metropolitan area for the purposes of paragraph 8(1)(g) of the Act. Accordingly, the amount of this allowance would not be deducted from XXXXXXXXXX claim for employment expenses pursuant to paragraph 8(1)(g) of the Act.

In summary, it is our opinion that XXXXXXXXXX would be required to deduct the amount of the non-taxable allowance from his employment expense deduction but would not be required to deduct the amount of the taxable allowance which has been included in his income by virtue of subsection 6(1)(b) of the Act.

We trust that our comments will be of assistance.

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