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Additional arguments to support your defense - When CRA demands an extensive list of details for Meal Expenses

When it comes to addressing the common tactic of demanding an extensive list of details to support Meal Expenses, it is likely that you may face many layers of error and misleading information over the course of your CRA Audit. As we show below, you need to double-check everything that the Auditor tells you and every reference he appeals to in attempting to disallow your expenses.

As we've already shown, the list of details given in IT518r does not appear anywhere in the Income Tax Act. In this way, we've established that the CRA Auditor has attempted to support his request by citing a requirement in an Interpretation Bulletin that goes beyond the binding requirements of the Act. But a further question should now be considered: Did the Auditor even make proper use of the Interpretation Bulletin itself?

Interpretation Bulletin IT518r - in context

The Auditor quoted a portion of text from IT518r listing a series of details that should be provided to support an expense. If we looked at IT815r, we would find the words he quoted really are there in article 19. However, does that mean the Auditor has cited them in their proper context? Not necessarily. So let's take a closer look at IT518r.

Food and Beverages

¶ 17. The 50% limitation applies to the cost of food or beverages for human consumption including any related expenses such as taxes and tips. In addition, the cost of a restaurant gift certificate is considered to be an expense for food or beverages and is subject to this limitation.


¶ 18. Paragraph 67.1(4)(b) includes amusement and recreation as "entertainment." Section 67.1 also mentions the "enjoyment of entertainment." This refers to the mere attendance at or experience of the event or service. While not an exhaustive list, the following items are considered to be entertainment expenses and are subject to the 50% limitation:

(a) the cost of tickets for a theatre, concert, athletic event or other performance;

(b) the cost of private boxes at sports facilities;

(c) the cost of room rentals to provide entertainment, such as a hospitality suite;

(d) the cost of a cruise;

(e) the cost of admission to a fashion show;

(f) the cost of entertaining guests at night clubs, athletic, social and sporting clubs and on vacation and other similar trips.

Expenses related to the above items, such as taxes, gratuities, and cover charges, are also subject to the 50% limitation.

¶ 19. For any outlay for entertainment to qualify as a deductible expense, a taxpayer must be prepared to demonstrate that the amount was incurred for the purpose of earning income (see the current version of IT-487, General Limitations on Deductions of Outlays or Expenses). Records should be maintained of the names and business addresses of the customers or other persons being entertained, together with the relevant places, dates, times and amounts supported by such vouchers as are reasonably obtainable. Expenses that are personal in nature (other than expenses incurred by the taxpayer while away from home in the course of carrying on business) are not deductible by virtue of paragraph 18(1)(h).

Does anything jump out at you when you look at the excerpt of IT518r above? Do you see where the bold text, representing our "extensive list of details", happens to fall in the flow of information? It falls specifically under the heading of Entertainment, which is separated from the heading of Food and Beverages. And look at the list of examples under article 18 that help to define what "Entertainment" means.

This corresponds to subsection 67.1(4)(b) of the Income Tax Act:


67.1 (4) For the purposes of this section,

(b) “entertainment” includes amusement and recreation.

This is taken from the same section of the Act that we considered earlier where the 50% limitation was set out.

Example decision from tax court

In the case of Tozer v. The Queen, heard in April 2004, The Honourable Justice François Angers said the following:

I accept that the third person food and beverage expense does not come under "entertainment" which is partly defined in paragraph 67.1(4)(b) as amusement and recreation. Entertainment is more in the category of tickets to a sporting or cultural event, a fishing trip or a cruise. . . . He had business gatherings over a meal and picks up the bill as he would be expected to.

Furthermore, on the last page of IT518r, there is a section called Legislative and Other Changes, which details certain changes that have been made throughout the document, listed by article, with one of the changes being the addition of this "extensive list" to article 19. In every case where the changes or additions to an article are intended to apply to both Meals and Entertainment, both types of expenses are mentioned in the description of the change. When it comes to article 19, however, the description of the change mentions only Entertainment expenses while any mention of Meal expenses is omitted.

In reality, while both Meal and Entertainment expenses are subject to the 50% limitation on deductions, the extensive list of details specified in article 19 of IT518r, which is not even legally binding, applies only to Entertainment expenses, not Meal (Food and Beverage) expenses.


As illustrated in the example above, you are likely to face multiple layers of error when undergoing a CRA Tax Audit. In the example above, not only did the Auditor attempt to demand an extensive list of details to support Meal Expenses that went beyond the requirements of the Income Tax Act, but he did so by appealing to an Interpretation Bulletin that he then cited out of context.

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left Audit Self Defense is committed to making sure you never have to pay more to CRA than you are legally required to, and to making sure you have the tools you need to calmly and effectively deal with CRA if they come calling. Do we want you to win your case? Absolutely! However, Audit Self Defense cannot guarantee successful audit decisions. Nobody can guarantee that.