11 May 1998 Internal T.I. 9802137 - EMPLOYMENT AT A SPECIAL WORK SITE

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Whether the allowance received by the individual constitutes a reasonable allowance excluded from income by virtue of subsection 6(6) of the Act.

Position: Allowance would be considered reasonable.

Reasons: Since the allowance is based on an estimate of the cost of board and lodging in the surrounding area, and if in fact all other conditions of paragraph 6(6)(a)(i) are met, the allowance is non-taxable regardless of the amount actually spent by the individual.

							May 11, 1998

	Income Tax Appeals Division		HEADQUARTERS
	Appeals Branch Headquarters		Karen Power, C.A.
	Michel Carbonneau, Manager		(613) 957-8953
	Attention:  Pierre Picard
							8-980213

Employment at a special work site - subsection 6(6) of the Income Tax Act

This is in reply to your memorandum of January 27, 1998, wherein you request our comments on whether the view summarized hereunder corresponds to the Department’s position.

It is your opinion, with respect to subsection 6(6) of the Income Tax Act (the “Act”), that once the Department is satisfied that an allowance is not in excess of a reasonable amount and that all the other conditions of paragraph 6(6)(a)(i) are met, the allowance received by the employee will be exempt from taxation regardless of the amount actually spent.

For example, an employer pays a non-accountable daily allowance of $40 for board and lodging to employees of a special worksite. The allowance is based on a reasonable estimate of the cost of such board and lodging in the surrounding area. One employee brings a travel trailer and installs it on a camp ground not far from the worksite. He provides for his own food, heat and light. His actual daily costs amount to $10 and are far less than the amount of the allowance received. He owns a self-contained domestic establishment which he maintains available and where his family resides. Due to the distance, he cannot be expected to return there on a daily basis. He holds employment of a temporary nature at the special worksite.

It is your view in the above example, that living in a trailer and providing for one’s own food meets the definition of “board and lodging” and that the allowance received would be exempted if the Department is satisfied that the amount determined by the employer is not in excess of a reasonable amount.

Our Comments

As you have noted, we have previously indicated that the reasonableness of an allowance is a question of fact. It must be related to the amount of actual expense an individual is likely to incur in respect of the expenses for which the allowance is provided rather than being based on other factors such as levels of salary.

In our view, if in fact all other conditions of paragraph 6(6)(a)(i) are met, the allowance which is based on an estimate of the costs of such board and lodging in the surrounding area would be considered reasonable and therefore non-taxable regardless of the amount actually spent by the employee.

Roberta Albert, C.A.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch