6 April 1998 External T.I. 9801325 - EMPLOYER-PROVIDED CLOTHING

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:

Request an opinion on the tax status of clothing provided to an employee by an employer in various situations.

Position:

Provided general comments on the Department's position stated in IT-470R, paragraphs 29 and 30. This position was extended to cover situations of reimbursements and allowances.

Reasons:

See prior files (E7M1557A, E9100666, F4M04716, F9104706, E9114525, F9218394, E9415455, F9522855).

                                           5-980132
XXXXXXXXXX		                       A. St-Amour, CA

Attention: XXXXXXXXXX

April 6, 1998

Dear XXXXXXXXXX:

Re: Employer-Provided Clothing

This is in response to your letter of January 14, 1998, requesting an opinion on the tax status of clothing provided to an employee by an employer in various situations.

It appears that your inquiry relates to actual transactions that are proposed or completed. Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. Accordingly, since your situation appears to relate to a factual situation, we cannot provide any specific answer to your queries at this time. The following comments are, therefore, of a general nature only, are not binding on the Department and may not be appropriate in a particular circumstance.

Paragraph 6(1)(a) of the Act provides that a taxpayer shall include in computing the income from an office or employment the value of board, lodging and other benefits of any kind whatever. Generally, with the exception of uniforms or protective clothing required to be used at work, the cost of clothing is a personal expense.

The Department's position concerning uniforms and protective clothing is outlined in paragraphs 29 and 30 of Interpretation Bulletin IT-470R. Paragraph 29 describes the situation where the special clothing (or safety footwear) is supplied to an employee by the employer pursuant to a requirement by the employer that such clothing be worn as protection against the potential hazards of the employment. Under these circumstances, the employee is not regarded as receiving a taxable benefit. This position has been extended to cover situations where the employer reimburses the employee for purchases of special clothing upon presentation of proof of purchase. It is also our view that, where an employee receives a non-accountable allowance in respect of special clothing, or safety footwear, the allowance will not be required to be included in income to the extent that the allowance is reasonable and actually expended for the purchase of the special items. Such items provided by an employer to an employee are not considered a taxable benefit within the meaning of paragraph 6(1)(a) of the Act in view of the lack of personal benefit to the employee: the employee is required by his employer to wear the uniform or protective clothing while performing the duties of his employment and there is no possibility of personal use of these items by the employee during off-duty hours.

Paragraph 30 of the same bulletin describes the situation where the employees are reimbursed for cost of laundry or dry cleaning of special clothing (upon presentation of receipts to the employer). Such a reimbursement is not considered to be a taxable benefit to the employee. Again, it is the Department's position that, where a non-accountable allowance is provided for this purpose, it will not be considered a taxable benefit to the extent that it is reasonable and was actually expended for that purpose.

It is our opinion that if the clothing is in fact only used at work and remains at the location of the employer at all times, there is no taxable benefit to the employee as he cannot be said to enjoy any personal benefit from the clothing.

As indicated in paragraph 22 of Information Circular 70-6R3 dated December 30, 1996, the above comments do not constitute an advance income tax ruling and are not binding on the Department. We trust the above comments will be of assistance to you. If you have any other questions, do not hesitate to contact us.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretation Directorate