8 June 2011 External T.I. 2011-0398021E5 - Overtime meal allowances

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.

Principal Issues: 1. Whether the $17 reasonable overtime meal allowance is a daily allowance or an allowance per meal. 2. Whether more than one meal allowance may be provided during a period of overtime without being considered a taxable benefit.

Position: 1. Per meal. 2. In this case, yes.

Reasons: 1 CRA's administrative policy allows for $17 per meal where all conditions of the administrative policy are met. 2. CRA's administrative policy allows for more than one meal allowance being provided during a period of continuous overtime worked as long as all conditions of the policy are met.

XXXXXXXXXX 							2011-039802
								M. Allan
June 8 2011

Dear XXXXXXXXXX :

Re: Overtime meal allowances under collective agreement

We are writing in response to your e-mail of March 3, 2011, in which you requested our opinion regarding the taxation of overtime meal allowances provided to unionized employees of your company under their collective agreement. More specifically, you have enquired whether the $17 meal allowance in our administrative policy for overtime meals and allowances is a daily allowance or an allowance per meal and how to assess the taxable benefit for the two scenarios you have outlined.

You advise that under the collective agreement, employees are provided with a hot meal or a meal ticket after working one hour of overtime following the completion of a regular shift, with a further hot meal or meal ticket provided when an employee works more than four hours thereafter. A meal ticket provided by the employer is in the form of a gift card to a local restaurant. Where a hot meal is provided by the employer, it is ordered in from a local restaurant. Employees may also choose to receive a meal allowance paid to them in cash.

You include examples where an employee may work nine consecutive hours of overtime following a regular shift, and therefore receive three hot meals, meal tickets, meal allowances, or a combination thereof. The hot meals provided by the employer range in dollar value, XXXXXXXXXX . The meal tickets and meal allowances provided by the employer are always in the amount of $XXXXXXXXXX .

Our comments

Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.

In accordance with paragraph 6(1)(a) of the Income Tax Act, employees are generally taxable on the value of benefits received from an employer by virtue of their employment. However, the CRA accepts that where an amount is paid by an employer in respect to an item that is primarily for the benefit of the employer, then it is generally not considered to be a taxable benefit to an employee. It is the employer's responsibility to determine whether the primary beneficiary of the economic advantage is the employer or the employee.

CRA's administrative policy concerning overtime meals is described in CRA Guide T4130, Taxable Benefits and Allowances, and Income Tax Technical News No. 40. Under the administrative policy, an overtime meal or meal allowance provided by an employer to an employee will not be considered a taxable benefit to the employee if all of the following conditions are met:

(1) The allowance, or the cost of the meal, is reasonable. Generally, a value of up to $17 is considered reasonable. Higher amounts may be considered reasonable if the relative cost of meals in that location is higher, or under other significant extenuating circumstances.

(2) The employee works two or more hours of overtime right before or right after his or her scheduled hours of work, and

(3) The overtime is infrequent and occasional in nature. Less than three times a week will generally be considered infrequent or occasional. This condition may also be met where the meal or allowance is provided three or more times a week on an occasional basis to meet workload demands such as major repairs or periodic financial reporting.

If overtime occurs on a frequent basis or becomes the norm, the CRA considers the overtime meal allowances to be a taxable benefit since they begin to take on the characteristics of additional remuneration.

In light of the information provided, where an employee works less than two hours of continuous overtime before or after his or her scheduled hours of work, and receives an employer provided meal, meal ticket or a paid meal allowance (collectively, a "meal allowance"), the value of the meal allowance would generally be considered a taxable benefit, as it does not meet the second condition described in CRA's administrative policy. Therefore, the first meal allowance received by an employee would be considered a taxable benefit since it was received after one hour of overtime.

However, where an employee works two or more hours of consecutive overtime, a meal allowance provided for that time period would generally be considered to meet the second condition described in CRA's administrative policy. The same conclusion applies to additional meal allowances provided at consecutive four hour intervals where an employee continues to work overtime. Therefore, the second and third meal allowances would be considered to meet the second condition of CRA's administrative policy, since they were received after two hours of overtime had been worked, at reasonable meal intervals of four hours each.

In order for an overtime meal or meal ticket to be considered a non-taxable benefit, the additional two conditions described above in CRA's policy must also be met. These conditions relate to the reasonableness of the cost of the meal, and the frequency of overtime worked.

We trust these comments will be of assistance.

Phyllis Waugh
A/Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch