2015-0614121E5 living allowance at a 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: Does an allowance for board and lodging qualify for the special work site exemption?

Position: Question of fact

Reasons: See response

Author: Ryer, Andrea

Section: 6(6), 6(1)(b)

XXXXXXXXXX                                      2015-061412
                                                              A. Ryer

March 17, 2016


Re: Special work site exemption

We are writing in response to your enquiry that we received on October 19, 2015, asking whether board and lodging allowances should be included in your employees’ income from employment. Based on our discussions (Ryer/XXXXXXXXXX), you would like to particularly know if the allowances may be excluded from income as reasonable allowances for board and lodging.

In the situation described, the employees work at XXXXXXXXXX (“the work site”) located XXXXXXXXXX (“the City”) for a period of time. While working, the employees stayed in the City in trailers belonging to them. The employees receive two daily allowances: $XXXXXXXXXX for room costs and $XXXXXXXXXX for board. The employees travel daily between their trailers in the City and the work site using employer-provided vehicles. You state that the employees maintain their permanent (principal) homes (i.e., self-contained domestic establishments) in another city XXXXXXXXXX km away from the City, and that their homes remain available for their use and occupation while the employees are at the work site.

Our Comments

This technical interpretation provides general comments about the provisions of the Income Tax Act (Act) and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of a particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R6, Advance Income Tax Rulings and Technical Interpretations.

In general, allowances paid by an employer to an employee are included in an employee’s income under paragraph 6(1)(b) of the Act, unless they fall within certain specified exceptions. One of these exceptions is contained in subsection 6(6) of the Act. Paragraph 6(6)(a) of the Act excludes from income the value of an allowance (not in excess of a reasonable amount) in respect of expenses an employee has incurred for board and lodging for a period at a special work site or remote location, provided certain conditions are met. These conditions are described in IT-91R4, Employment at Special Work Sites or Remote Work Locations, which is available on the Canada Revenue Agency’s website. These conditions were previously outlined to you on November 30, 2015.

In order for a board and lodging allowance to be excluded from income, the employee must have actually incurred expenses and the allowance must not be in excess of a reasonable amount. The Act does not define reasonable amount for the purposes of paragraph 6(6)(a). Whether an allowance is in excess of a reasonable amount is always a question of fact to be considered in light of all the relevant circumstances. It is our view that an allowance paid to cover the reasonable out-of-pocket expenses the employee is likely to incur for his or her board and lodging for a period at a special work site or remote location would generally be considered not in excess of a reasonable amount. However, where the allowance is much larger than the employee’s actual reasonable out-of-pocket expenses, it is likely in excess of a reasonable amount. In these cases, the exception in subsection 6(6) of the Act would not apply. Where the exception does not apply, the amount of the allowance should be included in the employee’s income from employment and reported on the employee’s T4 slip, Statement of Remuneration Paid, for the year.

We trust these comments will be of assistance to you.

Yours truly,


Nerill Thomas-Wilkinson, CPA, CA
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate

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