6 December 1996 External T.I. 9633735 - CAN EMPL'EE DEDUC EX WHEN EMP'ER CHARGES ROOMBOARD

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:

what criteria used to determine if an allowance is reasonable and whether employee living in a bunkhouse can claim a deduction for amounts paid to the employer for board (work site is not in a prescribed zone but is sufficiently far from any established community as to prevent the employee from obtaining any other lodging)

Position:

reasonableness of an allowance is a question of fact to be determined in light of the expenses for which the allowance is paid - no deduction available to employee if this is the employee's regular work location

Reasons:

section 8 deductions for board and lodging is restricted to costs incurred while travelling in the course of employment away from the employer's place of business

A. Humenuk
XXXXXXXXXX							963373

Attention: XXXXXXXXXX

December 6, 1996

Dear XXXXXXXXXX:

Re: Employees at a Remote Work Location

We are replying to your letter of September 27, 1996 in which you ask questions relating to allowances for board and lodging paid to employees working at locations which are far from any established community.

Subsection 6(6) of the Income Tax Act (Act) exempts from income, certain benefits provided or allowances received by an individual employed at a special work site or a remote work location in respect of personal or living expenses, which would otherwise be included in income under paragraph 6(1)(a) or (b) of the Act. One of the conditions necessary for the exemption is that such allowances must not be in excess of a reasonable amount. You asked for clarification as to what constitutes a reasonable allowance for this purpose and in particular, whether $50 a day was reasonable.

You also asked whether an employee would be entitled to a deduction for the amount paid for board and lodging at a remote location when the employee is unable to obtain lodging in a self-contained domestic establishment because the work location is so far from any established community. In our conversation of November 21, 1996 (XXXXXXXXXX\Humenuk), you clarified that the payment for board and lodging would be made to the employer for bunkhouse accommodation because the work site is so far from any established community that the employees are unable to establish self-contained domestic establishments.

The reasonableness of an allowance depends in part, on what expenses the allowance is intended to cover. If the allowance is a reasonable approximation of what the employee is likely to spend for the expense or expenses covered by the allowance, then the allowance will be considered reasonable. The onus is on the employer to determine whether the allowance paid for board and lodging at a particular place is reasonable under the circumstances. In addition, we note that an employee and his or her employer must complete a copy of form TD4, "Declaration of Exemption - Employment at Special Work Site" in order to claim an exemption under subsection 6(6) of the Act.

With respect to your second question, there is no provision in the Act which would allow an individual to claim a deduction for the costs of room and board at a remote location (other than one which is a prescribed northern or intermediate zone as defined in Regulation 7303.1), except where such costs are incurred travelling in the course of employment. The conditions under which a deduction under paragraph 8(1)(h) of the Act for meals and lodging (including room and board) while travelling in the course of employment are discussed in paragraphs 31 - 34 of Interpretation Bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees.

We trust our comments will be of assistance to you.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch