27 August 1996 Internal T.I. 9618577 - TAXABLE BENEFITS - MEALS

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:

An individual has raised the following concerns relating to his employment aboard a coast guard vessel which is involved in search and rescue operations:

- One concern relates to the calculation of the value of board where (i) he declines a meal when prior notice has been provided to the employer, or (ii) he may only have received one meal but was considered by his employer to have been provided with three meals.

- The second concern is whether he qualifies for the special work site exclusion or remote work location exclusion under subsection 6(6) of the Income Tax (the Act). Under the terms of his employment, he has indicated that he is unable to leave the vessel during the course of his watchkeeping duties. In addition, he believes that the nature of his employment duties in conjunction with the hours of work should be a factor in determining whether he qualifies for the exemption.

Position:

- The value of the meals is taxable under paragraph 6(1)(a) of the Act but the employer's method of calculating the benefit should be reviewed. - He does not qualify for the special work site exclusion under subparagraph 6(6)(a)(i) of the Act because his duties are not of a temporary nature. He also does not qualify for the remote work location exclusion (subparagraph 6(6)(a)(ii) of the Act) unless he is actually at sea for a period of not less than 36 hours.

Reasons:

- In the case of the first concern, paragraph 6(1)(a) refers to the value of board received or enjoyed. However, as it is the employer's responsibility to determine the taxable benefits being received by an employee, it will be necessary to review the method used by the employer.

- Pursuant to comments in IT-254R2, a vessel can qualify as a remote work location in respect of an employee when it is "at sea" for a period of at least 36 hours. In addition, paragraph 4 of IT-254R2 sets out special circumstances in which certain time in port on board a vessel is considered to be time "at sea" for the purposes of the exemption. However, it is our view that time spent on the vessel in port as part of the individual's regular watchkeeping duties is not similar to those special circumstances.

							August 21, 1996

	Newfoundland & Labrador		HEADQUARTERS
	  Tax Services Office		M. Eisner
	Client Services Division		(613) 957-8953

	Attention:  Mary Benson
							961857

Meal and Quarters for Ship Officers

This is in reply to your memorandum of May 24, 1996, in connection with the above-noted subject.

You have enclosed correspondence that was sent to your office by XXXXXXXXXX (the Employee). The Employee carries out employment duties aboard a coast guard vessel, which is involved in search and rescue operations.

The Employee has indicated that the amount of benefits in respect of board and lodging may not have been properly determined by his employer and he has asked us to consider four points. Two of the points relate to the calculation of the benefit in respect of meals and two of the points relate to the exemption under subsection 6(6) of the Act.

Meals

With respect to the first two points, the Employee has indicated that in the course of some work shifts, he may have declined a meal when prior notice was given to the employer. Alternatively, he may only have received one meal but was considered by his employer to have been provided with three meals. In connection with these comments, he has asked (i) whether an employee may be taxed on meals he did not receive, and (ii) whether the benefit should be calculated on a per meal basis or a per diem basis.

In relation to the above comments, paragraph 6(1)(a) of the Income Tax Act (the Act) provides that the value of board received or enjoyed by an individual in the course of his or her employment must be included in the individual's income. The limited information provided by the Employee suggests that the value of the benefit for board may not have been correctly determined by his employer. As it is the employer's responsibility to determine the taxable benefits being received by an employee, it will be necessary for your office to review the method used by the employer in establishing the value of that benefit. In this regard, we suggest that you review the terms of the employment contract. It may also be helpful to seek input from the Source Deductions Division of your office.

Exemption - Special Work Site or Remote Work Location

The other considerations concern whether the value of the benefit qualifies for the special work site exclusion or the remote work location exclusion under subparagraph 6(6)(a)(i) or (ii) of the Act. In this regard, the Employee noted that he is unable to leave the vessel, whether it's at sea or in port, under the terms of his employment contract. In addition, he believes that the nature of his employment duties in conjunction with the hours of work should be a factor in determining whether he qualifies for the exemption under subsection 6(6) of the Act.

One of the main requirements for the special work site exclusion under subparagraph 6(6)(a)(i) of the Act is that the duties performed must be of a temporary nature. Since the Employee is a full-time employee on the vessel, it is our view that he could not qualify for this exclusion under subparagraph 6(6)(a)(i) of the Act because his duties are not of a "temporary nature."

For the purposes of the remote work location exclusion under subparagraph 6(6)(a)(ii) of the Act, paragraph 3 of Interpretation Bulletin IT-254R2 discusses the unique characteristics of a ship or vessel as a place of work in connection with its physical or geographical situation when it is at sea for a period of time of not less than 36 hours. Paragraph 4 of IT-254R2 describes special circumstances in which certain time in port on board a vessel is considered to be time "at sea" for purposes of the exemption. With respect to these comments, the Employee has stated that he is normally required to remain on board the vessel (both at sea and in port) because of the nature of his duties as a watchkeeping officer.

In our view, the time spent on the vessel in port as part of the Employee's regularly scheduled watchkeeping duties when he cannot leave the vessel may not normally be considered to be part of his time "at sea." Accordingly, the in port time cannot be regarded as part of the special circumstances relating to the 36 hour "at sea" time requirement described in paragraph 4 of IT-254R2. On the other hand, when the Employee is actually at sea for a period of not less than 36 hours, it is our view that the remote work location exclusion in subparagraph 6(6)(a)(ii) of the Act would apply to the value of his board and lodging during such periods.

Should further technical assistance be required, we would be pleased to provide our views.

John F. Oulton
Section Chief
Business, Property & Personal Section
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch