25 November 2003 External T.I. 2003-0039225 - 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 CCRA.

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

Principal Issues:

Are payments made to employees in respect of hotels, meals and travel exempt from employment income virtue of subsection 6(6) of the Act?

Position TAKEN:

Maybe.

Reasons:

Question of fact.

XXXXXXXXXX 2003-003922
T. Young, CA
November 25, 2003

Dear XXXXXXXXXX:

Re: Special Work Site

We are writing in response to your letter of September 16, 2003, requesting confirmation that the special work site provisions in the Income Tax Act (the "Act") apply in the situation outlined below.

XXXXXXXXXX (the "Employer"), a temporary staffing agency, employs XXXXXXXXXX (the "Employees") on a temporary basis on behalf of a client, XXXXXXXXXX. The Employees work in XXXXXXXXXX. Employees who live greater than 80 kilometres from the work site are provided with the following benefits and allowances:

? a mileage allowance of $XXXXXXXXXX per kilometre;
? $XXXXXXXXXX per day for meals (breakfast and dinner); and
? accommodation in a hotel (2 Employees per room).

Employees who choose to stay with family or friends are provided with a daily allowance of $XXXXXXXXXX per day in lieu of hotel accommodations.

You have asked us to confirm that the special work site provisions in subsection 6(6) of the Income Tax Act (the "Act") apply such that the above benefits and allowances will be non-taxable to the employees.

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. However, we are prepared to provide the following comments, which may be of assistance to you.

Subsection 6(6) of the Act - Special Work Site

As stated in paragraph 1 of IT-91R4, Employment at Special Work Sites or Remote Work Locations, generally, an allowance paid to an employee and the value of employer-provided board and lodging or transportation to and from the job are included in the employee's income under the rules in subsection 6(1) of the Act. These rules also apply to amounts paid to reimburse outlays by an employee for meals, lodging, transportation or other items, which are personal or living expenses. However, by virtue of subsection 6(6) of the Act, an exception to these rules is provided in limited circumstances for special work sites or remote work locations. For detailed information on the application of subsection 6(6), please refer to the interpretation bulletin, which can be found on our web site (www.ccra.gc.ca).

Unfortunately, we cannot make a definitive determination of whether subsection 6(6) of the Act applies to all of your employees. This determination must be made on a case-by-case basis because the provision may or may not apply to all employees or even to the same employee throughout the period of employment. For instance, one of the requirements of the provision is that the period "during which the taxpayer was required by the taxpayer's duties to be away from the taxpayer's principal place of residence, or to be at the special work site or location, was not less than 36 hours".

With respect to the reasonableness of the allowances paid, it is a question of fact whether particular allowances are reasonable in the circumstances. However, generally the CCRA will accept as reasonable mileage allowances not in excess of the rates prescribed in section 7306 of the Income Tax Regulations. For 2003, the prescribed rates for Ontario are 42 cents per kilometre for the first 5,000 kilometres and 36 cents per kilometre thereafter.

To assist you in determining whether the meal and accommodation allowances are reasonable, it may be helpful to compare your rates with those paid by other organizations. Potential sources include the various levels of government. For example, the federal government travel policy can be found on the Treasury Board of Canada web site at http://www.tbs-sct.gc.ca/pubs_pol/hrpubs/TBM_113/td-dv_e.asp.

Subsection 81(3.1) of the Act - Part-time employees:

Subsection 81(3.1) of the Act excludes from income amounts received by an individual in respect of part-time employment as an allowance for, or reimbursement of, travel expenses during a period throughout which the individual has other employment or is carrying on a business. Such allowances are generally not included in income to the extent that they are paid by the employer, do not exceed a reasonable amount, and meet the 80 kilometre distance requirement. For more details, please refer to paragraph 54 of interpretation bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees, which can be found on our web site.

We trust our comments will be of assistance to you. If you have any further questions or if you need assistance in determining if a particular employee qualifies for the special work site exemption, please contact the Trust Accounts Division of your local Tax Services Office.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

- 3 -