12 July 2007 External T.I. 2007-0219611E5 - Meals - Transport employee

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 transport employees who travel significant distances but return home each day are entitled to claim meals under paragraph 8(1)(g) of the Income Tax Act.

Position: No. May be deductible under subsection 8(1)(h), question of fact.

Reasons: Paragraph 8(1)(g) of the Act. No overnight stay therefore fails to meet the lodging condition.

								2007-021961
XXXXXXXXXX  						Joy Bertram, B.Comm.,
								CGA, CPA(vt)
July 12, 2007

Dear XXXXXXXXXX,

Re: Meal Expenses - Transport Employee

We are writing in response to your letter of December 27, 2006 regarding the deductibility of meal expenses incurred by transport employees.

Your letter described a situation in which an employee regularly transports goods away from the employer's municipality on short and long haul trips. The distances range from 175 to 400 kilometres and the duration of trips range from 8 to 12 hours. Each day the employee returns home to the employer's municipality. You referred to ¶3 of Information Circular IC 73-21R9 and requested our opinion as to whether in the scenario posed, the transport employee would be entitled to claim a deduction for meal expenses under paragraph 8(1)(g) of the Income Tax Act (the "Act").

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. We are, however, prepared to provide the following general comments.

Paragraph 8(1)(g) of the Act applies only where all of the following conditions are met:

• The employee works for an employer whose main business is the transport of goods and/or passengers (such as an airline, railway, bus or trucking company),
• The employee travels in vehicles the employer uses to transport goods and/or passengers,
• The employee regularly has to travel away from the municipality (and the metropolitan area, if there is one) where the employer's establishment to which the taxpayer reports for work is located, and
• The employee regularly incurs expenses for both meals and lodging in the process.

Paragraph 8(1)(g) of the Act will not apply in the situation you described because without an overnight stay, the requirement for a disbursement for both meals and lodging has not been met. As stated in ¶3 of IC73-21R9, the CRA's view is that the deduction under paragraph 8(1)(g) of the Act is not intended for employees who return to their homes at the end of each day. The courts have supported this position.

However, you may wish to consider whether paragraph 8(1)(h) of the Act applies to the situation you have described. As discussed at the end of ¶3 of IC73-21R9, paragraph 8(1)(h) of the Act permits employees to deduct travel expenses such as meals where each of the following conditions is met:

• The employee is ordinarily required to carry on the duties of employment away from the employer's place of business or in different places,
• The employee was required under the contract of employment to pay the travel expenses he or she incurred in the performance of the employment duties,
• The employee was not in receipt of a non-taxable allowance for traveling expenses, and
• The employee has not claimed a deduction under any of paragraphs 8(1)(e)(f) or (g) of the Act.

The deduction of the cost of meals under paragraph 8(1)(h) of the Act is also subject to the requirements in subsection 8(4), which provides that an employee can only deduct the cost of meals consumed during a period while he or she was required by his or her duties to be away for 12 hours or more from the municipality and the metropolitan area, if there is one, where the employer's establishment to which he or she regularly reported for work was located. In order to claim the deduction, subsection 8(10) of the Act requires the employee to obtain a completed Form T2200 - Declaration of Conditions of Employment from the employer.

We note that regardless of whether an employee deducts the cost of meals pursuant to paragraph 8(1)(g) or (h) of the Act, section 67.1 restricts the deduction to 50% of the lesser of actual expenditures and a reasonable amount. As announced in Budget 2007, the Department of Finance Canada intends to amend section 67.1 of the Act as it pertains to long-haul truck drivers who satisfy certain factual requirements. The proposed change would phase in an increase to the deductible portion of meal and beverage expenses from 50% to 80%. If you are interested in more information on this measure, you may consult the Department of Finance Canada website at: http://www.budget.gc.ca/2007/bp/bpa5ae.html#personal

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