Principal Issues: [TaxInterpretations translation] Can a self-employed taxi driver claim lunch expenses when travelling?
Position: Generally, no.
Reasons: Application of paragraphs 18(1)(a) and 18(1)(h) of the Act..
July 4, 2007
Laval Tax Services Office Administration Centrale Business and Partnerships Division Attention: Gaston Hudon L. Allaire, LL.B, CGA
2007-023763
Deductibility of meal expenses for self-employed persons in the taxi sector
This is in response to your memorandum of May 28, 2007, asking for our opinion on the deductibility of meal expenses in the following situation.
You have described to us the situation of a self-employed taxi driver working at a fixed locale in the Montreal area. A dispatcher contacts him to tell him where to pick up clients during working hours. The taxpayer incurs meal expenses for lunch.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (the "Act").
Our Comments
Personal or living expenses (other than travel expenses incurred by the taxpayer in the course of carrying on business while away from home) are not deductible under paragraph 18(1)(h) of the Act.
The term "travel expenses" and the phrase "while away from home" are not defined in the Act. Consequently, we must rely on the ordinary meaning. In our view, travelling expenses are expenses incurred in travelling from one place to another and include food and accommodation. The phrase "while away from home" excludes travel between a residence and a place of employment. That passage is less restrictive than the one used in subsection 8(4) of the Act with respect to being away, for a period of not less than 12 hours, from the municipality or, as the case may be, the metropolitan area, which applies, under specific conditions, only to commissioned sales employees and other employees who are usually required to perform their duties elsewhere than at their employer's place of business or at different locations. Paragraph 18(1)(h) does not impose any minimum distance or duration requirements regarding the deductibility of a meal.
On the other hand, meal expenses incurred by a self-employed person in the course of carrying on their business while away from home are not automatically expenses incurred or made for the purpose of earning business income. In addition to satisfying the requirements of paragraph 18(1)(h), those expenses must also satisfy the requirements of paragraph 18(1)(a).
Thus, in order for a self-employed person's meal expenses to constitute deductible travel expenses, the self-employed person must demonstrate that the expenses were incurred in the course of carrying on a business and that they are expenses made or incurred for the purpose of earning business income.
We are of the view that meal expenses incurred by a self-employed person in respect of meals consumed alone at lunchtime are generally not expenses incurred by the self-employed person in the course of carrying on the person’s business and for the purpose of earning income from the business.
Access to Information
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the electronic library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
We hope that these comments are of assistance.
Interim Manager
Business and Partnerships Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.