Principal Issues: [TaxInterpretations translation] Are meal allowances paid to employees by a city taxable? Do they comply with the administrative policy on meals and allowances provided to employees during overtime, as set out in Income Tax Technical News No. 40?
Position: Question of fact. A meal allowance paid to a blue-collar employee before or after the first XXXXXXXXXX hours of continuous overtime work would not be taxable as it would meet all the criteria of the Canada Revenue Agency's administrative policy on meals and allowances provided to employees during overtime as outlined in Technical News No. 40. Since the meal allowance paid to the blue-collar employee is paid regardless of whether or not the employee is required to take a meal, i.e. it is not based on the fact that an employee is required to take a meal, the allowance paid after the XXXXXXXXXX overtime hours, following the normal hours of work and the first XXXXXXXXXX hours of continuous overtime work, would take the form of additional remuneration and would be taxable to the blue-collar employee. A meal allowance paid to a part-time firefighter responding to an emergency call does not meet the criteria of the administrative policy and would be taxable.
Reasons: Application of paragraph 6(1)(a) and the administrative policy on meals during overtime set out in Income Tax Technical News No. 40.
XXXXXXXXXX 2010-036666 Lucie Allaire, Advocate, CGA, D. Fisc.
September 24, 2010
Dear Madam,
Subject: Meal allowances
This is in response to your letter dated May 6, 2010, in which you requested our opinion regarding the taxation of meal allowances for blue-collar employees and part-time firefighters of the City of XXXXXXXXXX (the "City"), and in light of additional information provided during telephone exchanges (XXXXXXXXXX/Allaire).
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Blue-collar Employees
Where a blue-collar employee works overtime for more than XXXXXXXXXX hours before or after the employee’s regular hours of work, a meal allowance of $XXXXXXXXXX, indexed to the Consumer Price Index, is paid to the employee after such XXXXXXXXXX hours of work. If the overtime work continues, the same allowance of $XXXXXXXXXX is paid to the blue-collar employee for every XXXXXXXXXX hours of overtime worked.
You indicated that the overtime worked by a blue-collar employee is in connection with repairs to XXXXXXXXXX and municipal equipment, snow removal operations, or extra work. For particular situations, such as snow removal operations, you also state that a blue-collar employee may be called upon to work overtime more than XXXXXXXXXX times in a week.
Part-time Firefighters
Where a part-time City firefighter responds to an emergency call, an indexed meal allowance of $XXXXXXXXX may be paid to the part-time City firefighter after XXXXXXXXXX hours of continuous work. Subsequent to the payment of the previous meal allowance, the part-time firefighter may be entitled to a meal allowance in the same amount for every XXXXXXXXXX hours of continuous work, following the first XXXXXXXXXX hours of continuous work.
You indicated that these allowances are paid to a part-time firefighter who responds to an emergency call during or outside the firefighter’s regular part-time hours of work.
Based on the information you have provided, the City's part-time firefighters do not qualify as volunteer firefighters.
Finally, we understand that City employees travel within the City and the metropolitan area, where applicable, in the course of their duties.
Our Comments
It appears to us that the situation described in your letter and hereinafter summarized could constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the practice of this Directorate to provide comments on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documentation to the appropriate Tax Services Office for its opinion. However, we can offer the following general comments that may be helpful.
Paragraph 6(1)(a) generally provides, among other things, that the value of benefits of any kind whatever received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment are be included in computing the income of the taxpayer, except for certain benefits referred to in subparagraphs 6(1)(a)(i) to (v).
In that regard, the payment by the employer of an expense of an employee is generally a taxable benefit to be included in computing the employee's income under paragraph 6(1)(a) where it results in an economic benefit or advantage to the employee. However, the Canada Revenue Agency ("CRA") and the courts generally accept that where an amount paid is primarily for the benefit of the employer rather than the employee, the payment could not be a taxable benefit to the employee.
Furthermore, it is the employer's responsibility to determine who primarily benefits, the employer or the employee, from an economic benefit.
Notwithstanding the above, by administrative position, the CRA does not consider a meal allowance paid to such an employee working overtime as income if the following criteria are satisfied:
- the value of the meal or meal allowance is reasonable: in general, an amount up to $17 will be considered reasonable;
- the employee works at least two hours of overtime immediately before or immediately following the employee's normal scheduled hours of work;
- the overtime is infrequent or occasional.
With respect to the third criterion, the CRA considers overtime to be of an occasional nature if it is performed less than three times per week. However, that condition can be satisfied where a meal or allowance is provided three or more times a week on an occasional basis in order to meet ad hoc workload requirements, such as major repairs.
Thus, while it is a question of fact, overtime worked more than twice a week by a blue-collar employee would be considered infrequent or occasional if it does not occur regularly over an extended period of time or if it does not become the norm.
In light of the facts you have described to us, we are of the view that the allowance paid to a blue-collar employee who works XXXXXXXXXX hours of continuous overtime, before or after the employee’s normal work schedule, would not be taxable, as it would be related to an expense that he or she would have actually incurred for a meal, and all the criteria set out in the administrative policy are met. The same conclusion would apply to additional meal allowances paid to a blue-collar employee for every XXXXXXXXXX hours, in addition to the hours of the employee’s regular work schedule and the first XXXXXXXXXX hours of continuous overtime work.
On the other hand, the CRA considers a meal allowance to which an employee is entitled after working a certain minimum amount of overtime to be taxable if the payment to the employee is not truly related to whether or not the employee actually takes a meal. In such a case, meal allowances paid to a blue-collar employee could then be considered additional remuneration and would therefore be a taxable benefit.
Finally, it appears that meal allowances paid to a part-time firefighter are not related to the requirement to work overtime.
Since the CRA's administrative position with respect to meals during overtime does not appear to apply and since meal expenses are a personal expense, any meal allowance paid to a part-time firefighter would be taxable and would have to be added in computing the firefighter’s income from an office or employment under sections 5 and 6.
Best regards,
François Bordeleau, Advocate
Manager
Business and Partnerships Section
Income Tax Rulings Directorate.