26 November 1986 Income Tax Severed Letter 7-1150 - [Travelling Expenses/Meals]

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.

MEMORANDUM

DATA NOV 26/86

TO- SYDNEY DISTRICT OFFICE

FROM- SMALL BUSINESS AND GENERAL DIVISION D.Y. Dalphy (613) 957-2134

ATTENTION Norm Ellis Enquiries & Office Examination

RE: Travelling Expenses/Meals

This is in reply to your memorandum of October 8, 1986 regarding the deductibility of amounts expended by pulp contractors' employees for meals.

Specifically, you enquire whether a taxpayer in the following circumstances may deduct amounts expended on meals from his income from an office or employment:

1. The taxpayer is an employee of a pulp contractor. He drives a tractor- trailer, delivering pulp from a woodlot to a mill.

2. The employer's principal business is not transporting goods and/or passengers (an assumption).

3. The employer owns the vehicles and pays all the costs of transporting the pulp, with the exception of meals consumed by the drivers.

4. In a given day, it is only when the taxpayer makes more than one trip from the woodlot to the mill that his total time away from home would exceed 12 hours.

Based on the circumstances described above, we are of the opinion that the taxpayer would not be entitled to deduct amounts expended on meals from his income from an office or employment for the following reasons:

1. As the taxpayer does not appear to be "employed in the year in connection with the selling of property or negotiating of contracts for his employer", the deduction set out in paragraph 8(1)(f) of the Income Tax Act (the "Act") would not be available.

2. As the employer's principal business does not appear to be "passenger, goods or passenger and goods transport", the deduction set out in paragraph 8(1)(g) of the Act would not be available.

3. As there is no evidence before us to indicate that "under the contract of employment [of the taxpayer, he] was required to pay the travelling expenses incurred by him in the performance of the duties of his office or employment", the deduction set out in paragraph 8(1)(h) of the Act does not appear to be available.

4. Even if the taxpayer could satisfy all criteria of paragraph 8(1)(h) of the Act, he would be precluded from deducting an amount expended on meals by virtue of subsection 8(4) of the Act because that subsection requires a taxpayer to be away from both his employer's establishment and the metropolitan area where the employer's establishment is located for a period of 12 hours or more if he wishes to deduct amounts expended on meals pursuant to paragraph 8(1)(h) of the Act. In our view, a taxpayer must be away from his employer's establishment (and that metropolitan area)for at least 12 consecutive hours in order to take advantage of either the paragraph 8(1)(f) or (h) deductions; accordingly, a taxpayer who makes two trips from the woodlot to the mill would have to be away from his employer's establishment (and that metropolitan area) for at least 12 hours on one trip to avoid the subsection 8(4) limitation.

Additional Comments

1. In our view, the fact that an employer pays for all vehicle expenses does not preclude a taxpayer (who meets the requirements of paragraph 8(1)(h) and subsection 8(4) of the Act) from deducting amounts in respect of meals. Our copy of TOM 40(12) 9.(18)(5)(A)(a), dated August 1986, provides:

"A taxpayer, in order to qualify under paragraph 8(1)(h) to claim automobile expenses, must be contractually obligated to use his/her automobile in the performance of the office or employment duties and must also be required to pay the automobile expenses incurred."

As the taxpayer in the circumstances described above is making a claim for meals consumed while travelling, and not automobile expenses, we are of the view that TOM 40(12) 9.(18)(5)(A)(a) is not relevant in this situation.

2. "Travelling expenses" are not defined in the Income Tax Act and accordingly it is a question of fact whether a particular expense is a "travelling expense".

3. An employee who must supply his own meals is not necessarily entitled to a deduction under paragraph 8(1)(h) of the Act. A taxpayer must actually expend an amount for travelling in the course of performing the duties of his office or employment and meet all of the criteria set out in paragraph 8(1)(h) of the Act. (Subsection 8(4) and section 67 of the Act must also be satisfied in order for such a deduction to be available). For example, with reference to subparagraph 8(1)(h)(ii) of the Act, it would not be sufficient for a taxpayer to claim that he pays for his own meals; his contract of employment must require him to pay for travelling expenses incurred by him.

4. Paragraph 24(b) of Interpretation Bulletin IT-272R , in our view, refers to situations where an employer requires an employee to pay for some, but not all, of his travelling expenses. For example, an employee might be required to pay for amounts expended (e.g. oil, antifreeze) other than gas, in travelling in his vehicle from one town to another (perhaps the employer provides him with an employer credit card which may only be used for gasoline). Provided that employee falls within the criteria of paragraph 8(1)(h) and section 67 of the Act, he would be entitled to a deduction for amounts expended on oil and antifreeze.

5. Regarding your question in paragraph 3(B) of your memorandum, we advise that subsection 8(4) of the Act does not entitle taxpayers to deductions in respect of meals; rather, it limits the availability of the paragraph 8(1)(f) and (h) deductions in respect of meals to persons who are away from their employer's establishment (and the metropolitan area where that establishment is located) for at least 12 hours.

We hope our comments will assist you in conducting the post assessing project. Please do not hesitate to contact us if we may be of further assistance.

for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch