1 March 2011 External T.I. 2011-0392961E5 - Meals for self-employed truckers

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.

Principal Issues: Whether self-employed truckers are allowed to use the simplified method to calculate the cost of meal expenses.

Position: No.

Reasons: The simplified method cannot be used by anyone who is self-employed. They must keep receipts to support meal expenses claimed.

XXXXXXXXXX
									2011-039296
									Linda Compton
									(613) 957-2135
March 1, 2011

Dear XXXXXXXXXX :

Re: Technical Interpretation Request - Deductibility of Meal Expenses

We are writing in response to your e-mail dated January 13, 2011 wherein you seek comments concerning the availability of the "simplified method" for deducting the cost of meals incurred by self-employed truckers.

Our Comments:

Written confirmation of the tax implications inherent in particular transactions is 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 70-6R5, "Advance Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website.

A self-employed truck driver earns income from business. In computing business income, the expenses that may be deducted are limited by section 18 of the Income Tax Act (the "Act").

In order to qualify as a deductible business expense, an expense must be made or incurred by the taxpayer for the purpose of gaining or producing income from a business (paragraph 18(1)(a) of the Act) and the amount of the expense must be reasonable in the circumstances (section 67 of the Act). Further, paragraph 18(1)(h) of the Act denies a deduction for personal or living expenses other than travel expenses incurred by the taxpayer while away from home in the course of carrying on the taxpayer's business. In this regard, section 67.1 of the Act limits the amount deductible in respect of meals and beverages. The general limitation is 50% of the lesser of the actual expense or a reasonable amount. However, we note that where the individual's principal business or principal duty of employment is driving a long-haul truck that transports goods, the Act provides a different specified percentage. For 2010, 75% of the qualifying meal expense may be deducted. The deductible portion increases to 80% for years after 2010.

The "simplified method" for calculating meal expenses by reference to a flat rate tariff is an administrative position that applies only to transport employees who qualify for a deduction under paragraph 8(1)(g) of the Act. It does not extend truck drivers who earn business income. Self-employed individuals are allowed to claim expenses of meals consumed for the purpose of earning income while away from home in the course of carrying on business, but the amount of the deduction must be evidenced by receipts.

Subsection 230(1) of the Act requires every person carrying on business and every person who is required, by or pursuant to the Act, to pay or collect taxes or other amounts, including self-employed truck drivers, to maintain records and books of account, in such form and containing such information as will enable the taxes payable under the Act to be determined.

We trust that these comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch