2 February 1990 Ministerial Letter 00258 F - Employment Benefits

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.

Subject:  Employment Benefits

We have reviewed the attached memorandum of December 19, 1988, from Michael 1.  Cardinal, Assistant Deputy Minister, Management Services Branch of Revenue Canada, Taxation.  The memorandum discusses five changes made to the travel and relocation policy for executives and senior management in the Federal public service.  The following comments represent our view on the tax consequences of these changes:

Relocation

Incidental Relocation Expenses

The establishment of 6% of the annual salary in effect on the day of departure from the old location, is raised to 8% (article .7.4.1 of Personal Management Manual, Volume 13, Chapter 375). The allowance referred to in this article is limited to a reimbursement of actual expenses permitted by Treasury Board guidelines and described in article .7 of PMM Vol. l3, Chap. 375 and a non-accountable allowance in the amount of either $100 or $200 depending on the employee's personal circumstances.  If an employee chooses not to claim the reimbursement of actual expenses permit under Treasury Board guidelines, he may claim a non-accountable allowance of either $200 or $650.  Since the amount of the non-accountable portion of the incidental allowance is a fixed dollar amount, the effect of the increase in the total allowances from 6% to 8% is to increase the maximum reimbursement permitted for actual incidental expenses incurred.  While the portion of the non-accountable allowance in excess of $500 is taxable (a policy decision reflected in the Employee's and trustee's guide for filing T4-T4A and T4F returns), a reimbursement of actual expenses incurred in relation to the move (and the portion of the non-accountable allowance under $500) is only included in the employee's income to the extent that the employee is claiming a deduction in respect of such expenses under section 62 of the Act.

Temporary Dual Residence Assistance

Travel home will now be allowed every two weeks prior to the family relocating when the employee is in receipt of Temporary Dual Residence Assistance (Article .3.3 (d)) for a maximum of three months.  Provided that the phrase "travel home ... allowed" refers to the reimbursement of expenses incurred in the travel so described, or a reasonable travel allowance within the meaning of paragraph 6(1)(b) of the Act in respect of such travel, it is our view that the reimbursement or allowance would not be included in income to the extent that it represents a reasonable cost of travel.

Use of Agent to Assist in locating a Suitable Replacement Home

The Department will reimburse the cost of an agent's fees to assist in locating a replacement home in a new location. Provided that the cost is a liability of the purchaser (the employee) and is incurred in respect of the move, it is our view that the reimbursement is not included in income.

Relocation Home-Sale Assistance Policy

The plan provides for financial assistance to members of the Management Category when the selling price of the employee's home is lower than the assessed market value.  The maximum payment which may be paid under this plan is 105 of the fair market value of the property as established by appraisals.  This reimbursement is available for a maximum of six months from the date the fair market value is established.  It is our understanding that the term "assessed market value" means the fair market value as established by independent appraisals.  Insofar as the establishment of the assessed market value of the employee's home represents a binding guarantee on the employer, it is our view that a payment to the employee of an amount equivalent to the amount by which the independent appraisal of the property exceeds the actual sales price is not a taxable benefit to the employee.

Travel

Class of Travel

Business class travel will be reimbursed to executives at the fax 3 level or higher who are travelling at least 850 kilometres in any one-way trip.

It is our understanding that the travel for which the executive will be reimbursed is travel in the course of performing the duties of employment.  Provided that is the case, it is our view that the upgraded travel does not represent a taxable benefit to the executive employee.

ChiefPersonal and General SectionBusiness and General DivisionSpecialty Rulings Directorate Legislative and Intergovernmental Affairs Branch