The Canada Revenue Agency allows some self-employed individuals to claim an extra allowance for food consumed while working. The extra allowance applies to on-foot and bicycle couriers as well as rickshaw drivers.
If you are doing tax prep for someone who qualifies for this deduction, you should claim the allowable amount on line 8523 of Form T2125 (Statement of Business or Professional Activities). To claim the standard amount, take the number of days your client worked in a year and multiply that number by the fixed rate of $17.50. For instance, if your client worked 300 days, he can claim a deduction of $5,250. You can also report claims for other eligible meal and entertainment expenses on this line.
To explain, imagine your client went to dinner with a potential new customer. They talked about business, and your client spent a reasonable amount on dinner at $100. The CRA allows him to claim half of that amount as an allowable business expense. That brings the claim to $50. To continue with the above example, when you add this amount to your client’s extra food allowance, the total for line 8523 is $5,300.
These amounts, along with any other eligible business expenses, get subtracted from your client’s business revenue, and the result is his business income. For example, if your client has $30,000 in revenue and $6,000 in business expenses, he has $24,000 in business revenue.
If your client takes the standard daily rate of $17.50, he doesn’t have to keep any food receipts. He just needs proof of his work schedule in case he gets audited. If your client doesn’t want to take the standard daily rate, he needs receipts for all meal costs, and you also need to establish a baseline for what an average person consumes in a day. Your client’s claim is the difference between these two numbers.
The extra food allowance for couriers and rickshaw drivers can be a valuable deduction. Make sure your clients know about this deduction and help them claim it on their return.