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Business Travel Expenses

I will start by posting the information CRA provides on this matter: http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/t2125/ln9200-eng.html

You can deduct travel expenses you incur to earn business and professional income. Travel expenses include:

1. public transportation fares;

2. hotel accommodations; and meals.

In most cases, the 50% limit applies to the cost of meals, beverages, and entertainment when you travel. We discuss this limit in Meals and entertainment.

The 50% limit also applies to the cost of food and beverages served and entertainment enjoyed when you travel on an airplane, train, or bus, when the ticket price does not include such amounts.

Here some comments:

1. Travelling usually means more than 40 kms of the usual place of work.

2. You cannot deduct expenses that are not reasonable, Let’s say you took your wife, kids and mother-in-law to a business trip. Is it reasonable to expense all expenses incurred by family? I could give 100 examples but we all know what I’m talking about.

3. Guest expenses – If you take a guest with you it’s generally not considered to be a legitimate expense except if the guest is your employee or the individual has relevance in the business you’re conducting and is important to achieve your Business Trip Goals.

4. Meals are only deductable in 50%

a) There are several Accountants that expense 100% if the meal expense is during travel. They claim that being away there is no way for a person to make food arrangements and therefore they should be entitled to expense 100% I kind of agree with this position.

b) I know some cases where people expense 50% as meals and the other 50% as advertising and promotions – This is seriously wrong and in my point of view fraudulent. If you know you can only expense 50% in meals then you know the other 50% are not expense. I have seen a lot of fellow bookkeepers doing this. Make sure your bookkeeper is not doing it.

5. Mileage: I have to include this item in Business Travel Expenses: You are allowed to pay any employee Tax Free for mileage incurred while using their car on service travel. You can only pay this allowance if you did not reimbursed the employee for the expenses incurred in the use of the vehicle. The amount must be reasonable what inOntariomeans:

a) $0.53 per kilometer for the first 5,000 kilometers driven

b) $0.47 per kilometer driven after that c) Don’t forget to keep your mileage record on file

Please note that this is one of the most GREY AREAS of accounting and even if you comply with all the requisites your expenses may be not accepted by CRA if you get audited. It does help to keep all receipts and all possible notes on the business trip explaining every expense purpose and if possible the outcome of the trip. It’s easy to say but I don’t know anyone that keeps such detailed records.

In the end ”reasonable” seems to be the key, keep yourself within it and expect to be fine.

All accounting and Bookkeeping comments are to be taken for what they are (comments). Some comments refers to grey areas (in truth almost all of them). There’s so much you can do to be in the right side but CRA might have different interpretations than the ones exposed in the comments I express here.