26 August 2010 External T.I. 2010-0368031E5 - Payroll Allowance Credit

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 for providing notification that hotel rooms will not be required are taxable.

Position: They may be non-taxable.

Reasons: If the allowances are paid to compensate the employees for travel-related expenses as a result of using private accommodations they may be exempt pursuant to subparagraph 6(1)(b)(vii).

XXXXXXXXXX 							2010-036803
								Rita Ferguson
								519-645-5261
August 26, 2010

Dear XXXXXXXXXX :

Re: Technical Interpretation Request - Payroll Allowance Credit

This is in response to your fax of May 19, 2010 inquiring about the taxation of "Hotel Credit" payments made by XXXXXXXXXX (the "Employer") to XXXXXXXXXX (the "Employees").

When Employees are scheduled to stay overnight while working away from the Employer's place of business, the Employer's scheduling staff will make reservations for them to stay at commercial accommodations at the Employer's expense. If the Employees find that they will not require the reserved hotel room, for example when an Employee has opted to stay in private non-commercial accommodation instead, the terms of their collective agreements provide that they will be paid a Hotel Credit (XXXXXXXXXX ) if they advise the Employer's scheduling staff in a timely fashion that the hotel room will not be needed and the reservation can be cancelled.

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.

Paragraph 6(1)(b) of the Income Tax Act includes in income all amounts received in the year as allowances for personal or living expenses, or as an allowance for any other purpose. Subparagraph 6(1)(b)(vii) 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.

If the Hotel Credit payments are primarily intended to compensate the Employees for expenses associated with staying in non-commercial accommodations while they are travelling on company business, they may be non-taxable pursuant to subparagraph 6(1)(b)(vii). It is our view that the amounts currently being paid for the Hotel Credit would constitute a reasonable allowance for such expenses.

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