26 May 2004 External T.I. 2004-0067081E5 - Board & Lodging Allowance-Special Work Site

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: Whether a board and lodging allowance can be excluded as a taxable benefit if the employee owns two self-contained domestic establishments, one of which is in the vicinity of the special work site.

Position: Question of fact.

Reasons: Where an employee maintains another self-contained domestic establishment in the vicinity of the special work site, the exclusion in paragraph 6(6)(a) in respect of an allowance paid for board and lodging may still apply, provided that particular self-contained domestic establishment is not the employee's principal place of residence. The determination of which self-contained domestic establishment is the employee's principal place of residence will always be a question of fact. However, an employee may only have one principal place of residence. Where the employee's family resides is a persuasive, although not a conclusive factor in determining which self-contained domestic establishment is the employee's principal place of residence. Provided all of the above requirements are met, a reasonable allowance is respect of board and lodging expenses incurred by an employee who is away from his or her principal place of residence is exempt from inclusion in the employee's income by virtue of paragraph 6(6)(a).

XXXXXXXXXX 2004-006708
Kathryn McCarthy, CA
May 26, 2004

Dear XXXXXXXXXX,

Re: Board and Lodging Allowance - Employment at a Special Work Site

We are writing in response to your letter of March 4, 2004, concerning the above-noted issue.

You described an employee who owns homes in both XXXXXXXXXX. He works at the XXXXXXXXXX. The employee resides in the XXXXXXXXXX home during the week, however, he considers his home in XXXXXXXXXX to be his principal place of residence. You enquire whether the employee is eligible to receive a tax free allowance in respect of board and lodging pursuant to the special work site exclusion in paragraph 6(6)(a) of the Income Tax Act (the Act). You also enquire whether the place of residence of the employee's family has any impact on whether the special work site exclusion will apply.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. 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.

An allowance paid to an employee for board and lodging expenses incurred by the employee at a location that is considered the employee's regular place of employment is generally included in the employee's income pursuant to paragraph 6(1)(b) of the Act. However, paragraph 6(6)(a) may exempt the allowance from inclusion in the employee's income where the board and lodging expenses are incurred in respect of employment at a special work site.

The employee must meet all of the following requirements to exclude from income the value of a reasonable allowance for board and lodging expenses incurred in respect of employment at a special work site:

a) The duties of employment performed by the employee at the special work site are of a temporary nature (as a general rule, duties will be considered of a temporary nature if it can reasonably be expected that they will not provide continuous employment at a special work site beyond a period of two years);

b) Throughout the period the duties of employment are performed at the special work site, the employee maintains at another location a self-contained domestic establishment as the employee's principal place of residence, which is available for the employee's occupancy and is not rented by the employee to any other person;

c) The distance between the employee's principal place of residence and the special work site is such that the employee cannot be reasonably expected to commute daily; and

d) The period the employee is required to be away from the principal place of residence at the special work site because of the duties of employment is at least 36 hours.

Where an employee maintains another self-contained domestic establishment in the vicinity of the special work site, the exclusion in paragraph 6(6)(a) of the Act in respect of an allowance paid for board and lodging may still apply, provided that particular self-contained domestic establishment is not the employee's principal place of residence. The determination of which self-contained domestic establishment is the employee's principal place of residence will always be a question of fact. However, an employee may only have one principal place of residence. Where the employee's family resides is a persuasive, although not a conclusive factor in determining which self-contained domestic establishment is the employee's principal place of residence. Provided all of the above requirements are met, we are of the view that a reasonable allowance in respect of board and lodging expenses incurred by an employee who is away from his or her principal place of residence is exempt from inclusion in the employee's income by virtue of paragraph 6(6)(a) of the Act.

For more information on the application of subsection 6(6), refer to Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, which is available on our website at www.cra-arc.gc.ca. We trust our comments will be of assistance to you.

Yours truly,

Randy Hewlett, B. Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch