9 October 2003 Ministerial Correspondence 2003-0036814 - HARDSHIP 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 CCRA.

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

Principal Issues: Whether hardship and danger allowances received by employees working for a company in XXXXXXXXXX under a contract with the military would be tax-free

Position: Probably not

Reasons: Unless the allowance can be considered to be in respect of travel expenses, or for board, lodging or transportation at a special worksite, it would be taxable.

October 9, 2003

XXXXXXXXXX

Dear Colleague:

Thank you for your letter of August 7, 2003, outlining the concerns of one of your constituents about the "danger and hardship" allowances paid to employees of a private company working in XXXXXXXXXX.

Generally, allowances paid to employees are subject to tax unless they fall within one of the specific exceptions listed in the Income Tax Act. These exceptions include:

? travel and separation allowances paid to members of the Canadian Armed Forces under service regulations;
? representation and other special allowances paid to federal or provincial public servants and members of the Canadian Armed Forces;
? reasonable allowances for travel expenses paid to employees who are required to travel away from their regular work location; and
? allowances for board, lodging and transportation where the employee is working at a special worksite (a temporary location from which the employee is not expected to commute daily).

Since your constituent works for a company that is under contract with the Canadian Armed Forces and is therefore not a member of the Canadian Armed Forces or a public servant, the allowance he received from his employer for "hardship and danger" would only be excluded from income if it falls within the last two exceptions listed above. For more information on these, please refer to Interpretation Bulletins IT-522R, Vehicle, Travel and Sales Expenses of Employees, and IT-91R4, Employment at Special Work Sites or Remote Work Locations, which are available on the Canada Customs and Revenue Agency's Web site at www.ccra.gc.ca

The role of the CCRA is to administer and enforce the existing income tax laws as passed by Parliament and interpreted by the courts. The Department of Finance is responsible for the tax policy underlying the legislation. Since your constituent's concern is a matter of tax policy, I am forwarding a copy of your correspondence to the Honourable John Manley, Minister of Finance, for his consideration.

Thank you for having taken the time to write. I trust that this explanation will be helpful.

						Sincerely,

						Elinor Caplan

c.c.: The Honourable John Manley, P.C., M.P.

Deputy Prime Minister and
Minister of Finance
House of Commons
Ottawa ON K1A 0A6

Minister's Office
Political Assistant

Wayne Antle
957-2102
September 15, 2003
2003-003681
MEEC Editor: France Charette/957-8028
MEEC Peer Review: Lori McAleer/957-4199
Finalized 2003/10/02 - FC/ll