Royal Canadian Mounted Police Compensation Branch 1200 Alta Vista Drive Ottawa, Ontario K1A 0R2
Attention: W.J. Becker, Superintendant
Officer in ChargeN.R. Mitchell (613) 957-2137
July 21, 1987
Dear Sir:
Re: Transfer Allowances
This is in reply to your letter of May 1, 1987 in which you seek clarification of the issue of whether or not the transfer allowances paid to members of the R.C.M.P. can be considered non-taxable receipts.
We understand that the transfer allowance is a Treasury Board approved benefit payable to all members of the R.C.M.P. when relocated under the provisions of the R.C.M.P. Relocation Directive. The transfer allowance benefit has been in effect since January 1, 1985 and is based on the employee's substantive rate of pay on the day before departure. It is calculated at the rate of one month's salary for those who relocate with dependents or one-half month's salary in any other case. The transfer allowance is paid in recognition of a variety of factors associated with employee relocation, including the long term social and financial effects of relocation on R.C.M.P. members and their families, as well as actual personal costs which may be incurred in the course of moving but which are not reimbursed under the criteria of the R.C.M.P. Relocation Directive. You have indicated the following specific factors that the transfer allowance is intended to offset:
(a) adjustments in life styles necessitated by relocations to centres of varying sizes;
(b) immersion of families into unfamiliar cultural milieus;
(c) monetary and personal difficulties caused by unavailability of certain educational facilities in some locations;
(d) changes in disposable income resulting from differences in provincial sales tax, provincial income tax and municipal taxes, medical insurance, etc., from one location to another;
(e) damage, wear and deterioration of home furnishings caused by the process of moving; and
(f) differences in the cost, condition, quality and availability of food and clothing (and in clothing needs) between locations.
In our view, amounts received as transfer allowances in the circumstances described above must be included in the employees' incomes and be taxed as remuneration from employment. According to paragraph 6(l)(b) of the Income Tax Act (the "Act") an "allowance" received by an employee for personal or living expenses is subject to tax unless it is specifically exempted from tax by some other provision in the Act, e.g., the exceptions in subparagraph 6(1)(b)(i) to (ix), subsection 81(3.1) or subsection 6(6) of the Act. These transfer allowances would not qualify for these exemptions. Furthermore, because these transfer allowances would appear to be in the nature of non-accountable allowances which may be spent (or not) at the discretion of the recipient, these amounts would not qualify for the non- taxable treatment which may be accorded to amounts properly characterized as reimbursements of moving expenses. (See paragraph 34 of Interpretation Bulletin IT-470 (copy attached).)
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
c.c. Source Deductions Division
a. 6(1)(B) s. 62 NM/ jb