Andy works for a hydro company, installing and repairing hydro lines. He is working in an area of the municipality that is located over an hour away from the office, where he would normally have lunch. Rather than have Andy spend his lunch hour driving to and from the office, his employer pays him a reasonable lunch allowance so he can have lunch at a restaurant closer to his working location.

The employer is the primary beneficiary of this arrangement, and the allowance would not be included in Andy's income.

Example 2 – Taxable allowance

Jenny is an employee with DEF Company, and occasionally has to travel within the municipality to pick up supplies for her company using her own vehicle. This normally takes her most of the day. DEF gives Jenny a per diem of $50 to cover vehicle expenses and any food and beverage expense she may incur while performing her duties while away from her regular place of work.

Since this policy does not include motor vehicle allowances, the CRA would consider the flat rate allowance of $50, covering both meals and motor vehicle expenses, to be unreasonable. The entire allowance would be a taxable benefit to Jenny, unless DEF Company can show that the portion related to the meals is reasonable in the circumstances.

Example 3 – Taxable allowance

An employer provides employees with a travel allowance to cover food and beverages while the employees travel away from their regular place of work to perform their duties of employment. One of the employees chooses to return to the office for lunch and remains there until his afternoon appointment.

By choosing to return to the office for lunch, the employee is the primary beneficiary. The allowance would be a taxable benefit. However, if there are occasions when the employee is legitimately away from the office over the normal lunch period, the allowance may be excluded from income for those occasions.