29 September 2010 External T.I. 2010-0379521E5 - Allowance for Paramedics

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 payments made to employees whose scheduled meal breaks are delayed are taxable.

Position: In this case, yes.

Reasons: If the allowances are paid as extra compensation for having delayed meal breaks, they are taxable.

XXXXXXXXXX
                                                2010-037952
                                                Rita Ferguson
                                                519-645-5261
September 29, 2010

Dear XXXXXXXXXX :

Re: Technical Interpretation Request - Payment for Paramedics

This is in response to your letter of August 6, 2010 inquiring about the taxation of payments for late scheduled meal breaks.

Under the terms of the collective agreement governing the employment of Paramedics (the "Employees") in XXXXXXXXXX (the "Employer") the Employees may be entitled to a payment of $XXXXXXXXXX (the "Payment") if the Employer is unable to schedule a mid-shift meal break at the appropriate time during a work shift. You wish to know whether the Payment might fall within our recently revised policy for travel allowances.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced 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 complete, 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. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Subsection 5(1) of the Income Tax Act (the "Act") states that a taxpayer's income from an office or employment is the salary, wages and other remuneration, including gratuities, received by the taxpayer in the year. Paragraph 6(1)(b) of the Act also includes in income from employment all amounts received in the year as allowances for personal or living expenses, or as an allowance for any other purpose, unless it falls within the exceptions listed in subparagraphs 6(1)(b)(i) to (ix). Subparagraph 6(1)(b)(vii) of the Act provides an exception for reasonable allowances for travelling in the performance of the duties of an office or employment away from the municipality and the metropolitan area, if there is one, where the employer's place of business where the employee ordinarily worked is located. A recent change in the CRA's administrative treatment of travel allowances (other than motor vehicle allowances) is discussed in Income Tax Technical News #40 ("ITTN #40"). Effective for 2009, the CRA will accept that allowances paid for travel within the municipality or metropolitan area may be excluded from income if the allowance is paid primarily for the benefit of the employer. That is, an allowance may be excluded from income when its principal objective is to ensure that the employee's duties are undertaken in a more efficient manner during the course of a work shift, and where allowances paid are not indicative of an alternate form of remuneration.

It is a question of fact whether the Payment made to the Employees is a reasonable travel allowance which may be excluded from income under subparagraph 6(1)(b)(vii) of the Act. The provision for the Payment, as described in the collective agreement that was attached to your request, does not give any indication that the Payment is intended as a meal allowance. Nor do we see how it could reasonably be considered a meal allowance since factually the Payment is to be made only when there has been a delay in scheduling a meal break and not due to any particular situation that would require the Employees to incur additional travel expenses. In order for a meal or other travel allowance to be exempted by the policy in ITTN # 40 it is also a requirement that the allowance be paid primarily to benefit the Employer.

Accordingly it is our view that the Payment should more properly be considered additional remuneration which is taxable under subsection 5(1) of the Act.

We trust that these comments have been of assistance.

Yours truly,

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