What Are The Exceptions To The Limitation On Meals?

The 50% limitation on meals and expenses is often assumed without question. Subsections67.1(2), (3) and (4) provide multiple exceptions to the general 50% limitation, including, in some circumstances, the following:

1. Where food, beverages, and entertainment are part of the business, the limitation does not apply. Restaurants, thankfully, are not subject to the limitation.

2. The cost of entertaining the client at a charity's annual fund-raising dinner would be exempt from the 50% limitation. However, some charitable events do not qualify for this exception.

3. Amounts ultimately billed to a client and identified in the account submitted to the client as an expense relating to meals are fully deductible. The 50% limitation applies to the client.

4. An employer is not subject to the 50% limitation on allowances or reimbursements for meal or entertainment expenses that are included in an employee's income (pursuant to subsection 8(1)).5.

The 50% limitation does not apply if the employer incurs the amount for food, beverages, or entertainment that is generally available to all its employees at a particular place of business and is consumed or enjoyed by them. This is the Christmas party exception.

6. The limitation does not apply to meals and beverages served and entertainment provided as part of the cost of traveling on an airplane, train, or bus. This exception to the limitation does not apply to food, beverages and entertainment provided while traveling by ship, boat or ferry.