24 November 1997 Ministerial Letter 9724838 - TOOL ALLOWANCES AND MEAL EXPENSES

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:

deduction for tools for employees and meals deductions for employers

Position:

a tool allowance would be taxed, no deduction for tools (only for "supplies" if conditions are met), meal allowance deductible to employer usually if included in employees' income as well as if paid to workers at remote work locations

Reasons:

MINISTER/DEPUTY MINISTER'S OFFICE 7-05596M
ADM'S OFFICE
RETURN TO 15TH FLOOR, ALBION TOWER

November 24, 1997

XXXXXXXXXX

Dear XXXXXXXXXX:

I am writing in reply to your letter of August 11, 1997, addressed to The Honourable Paul Martin, Minister of Finance, and copied to the Minister of National Revenue. Minister Dhaliwal has asked that I address your concerns.

An employer-provided tool allowance or payment is, as noted by you, taxed in an employee's hands as there is nothing in the Income Tax Act (the Act) which would exempt the inclusion of the tool allowance from income. An employer would be permitted to deduct the full amount of any tool allowance paid to employees.

This treatment applies to allowances for power saws as well, that is, if the employer pays an allowance or saw rental to employees, the amount of that allowance or rental is required to be included in income. A deduction from employment income for the cost of supplies consumed in the performance of employment duties is provided if the employee meets all statutory requirements. Accordingly, an employee in the forestry industry who is required by his or her contract of employment to provide a power saw may be able to deduct the cost of the saw, in addition to the cost of operating it. This recognizes the short life span of power saws in the forestry industry.

You also raised the issue of the deductibility of meal expenses and allowances to employers. As you are aware, the Act provides a general limitation on the amount that may be deducted in respect of the human consumption of food or beverages or the enjoyment of entertainment expenses to 50% of the expense. However, there are exceptions to the general limitation rule. Generally, amounts expended for meals or meal allowances which are required to be included in employees' incomes are fully deductible. In addition, an exception does exist which permits a full deduction for meal allowances paid to workers at remote work locations. A remote work site refers to a location at which, by virtue of its remoteness from any established community, the employee cannot reasonably be expected to establish and maintain a self-contained domestic establishment and the employee is required by the employee's duties to be at the remote work location for at least 36 hours.

I hope that these comments are of assistance to you. Thank you for sharing your concerns about these issues with Minister Dhaliwal.

						Yours sincerely,

						Denis Lefebvre
						Assistant Deputy Minister
						Policy and Legislation Branch

Sandra Short
October 30, 1997
957-2136