“Can My Company Pay for My Lunch?” — The CRA Reality Behind Meals, Reimbursements, and Taxable Benefits

When you own a business, the line between “business expense” and “personal expense” can blur quickly. You might charge a coffee, a meal, or some fuel to the company card — it feels like part of running the business.

But CRA doesn’t see it that way.

From CRA’s perspective, any time your company pays for something that personally benefits someone — including yourself — that payment can become a taxable benefit. And your job, as the employer, is to decide whether it should be reported on a T4, a T5, or not at all.

🧩 Understanding “Personal Benefit”

CRA intentionally defines personal benefit broadly so it captures almost any transaction where company funds improve an individual’s personal situation. It isn’t limited to luxury perks — it can be as small as a lunch, a tank of gas, or reimbursing someone for an item they now personally own.

A personal benefit occurs when:

1. The employee (or shareholder) gains something measurable in value, and
2. The gain is primarily for their personal use, not to help the business earn income.

Examples:

• The company pays for a meal that the employee would otherwise have paid for themselves.
• The company reimburses personal vehicle fuel not directly tied to business travel.
• The company covers a personal expense and records it as a business cost.

“Someone personally benefited from a company payment — that’s taxable.”

🍁 A Real-World Example: The Owner-Manager Who Does It All

Meet Alex, a 40% shareholder and the only active employee of a small incorporated business in BC. Most days, Alex drives from site to site, checking on jobs and meeting clients. Lunch and coffee often happen on the go, and sometimes trips extend out of town. The company card is used for most purchases — and the other shareholders, who are passive investors, have agreed that Alex can use it for business expenses and the occasional meal.

So how does CRA view those transactions when it’s time to file the corporate return?

🔍 Understanding the Difference: T4 vs. T5 Benefits for Owner-Managers

Before diving into specific examples, it’s important to understand how CRA distinguishes between employee benefits (T4) and shareholder benefits (T5) — especially for owner-managers like Alex, who wear both hats.

When CRA reviews expenses charged to a company card, they start by asking a single question:

“Did this person receive the payment because they work for the company, or because they own it?”

⚖️ How CRA Makes the Call

CRA looks at intent and context — not just what the expense is, but why it was paid and how it would have been handled if the person weren’t a shareholder.

1. If the benefit would have been offered to any other employee doing the same work, → it’s an employment benefit (T4).
   Example: The company covers an overtime meal for someone staying late to finish a client project, or reimburses a portion of a cellphone plan used for work. These are tied to job performance — not ownership.
2. If the benefit was given only because the person controls or owns shares in the company, → it’s a shareholder benefit (T5).
   Example: A shareholder frequently charges personal meals or local errands to the company card without a clear business reason — something a regular employee wouldn’t be permitted to do.
3. If it’s unclear which hat you were wearing, CRA defaults to shareholder benefit.
   Employment benefits fall under ITA s.6(1)(a) (“by virtue of employment”). Shareholder benefits fall under ITA s.15(1) (“conferred on a shareholder”). If CRA believes access arose from ownership — not work — they’ll apply s.15(1) and deny the corporate deduction.

📊 What the Classification Means

Type of Benefit	Reported On	Deductible to Company?	Taxed to Individual?
Employment-related benefit	T4 (Code 40)	✅ Yes — 100% as payroll expense	✅ Yes — taxed as income
Shareholder-related benefit	T5 (Dividends / Other Income)	🚫 No — non-deductible to company	✅ Yes — taxed personally

In short: Employment benefits reward work. Shareholder benefits reward ownership. CRA doesn’t object to either — they just need you to classify them properly and support your reasoning.

☕ The Local Meals and Coffee Stops

Most of Alex’s charges are small — coffees, quick lunches, and snacks during workdays around town. These seem harmless, but CRA’s starting point is strict:

“Eating is a personal expense, unless the meal was necessary to earn business income.”

🟩 Option 1: Treat as a Taxable Employment Benefit (T4)

Include the total value of the meals on the employee’s T4 (Code 40), with payroll deductions. The company can then deduct 100% of the cost as remuneration.

For official CRA guidance, see the Employers’ Guide – Taxable Benefits and Allowances (CRA).

🟨 Option 2: Reimburse Only Business-Related Meals

Employee pays personally and submits only business-related receipts (client meals, supplier meetings, travel days). Company reimburses and deducts 50% as Meals & Entertainment.

To learn how CRA classifies travel and mileage reimbursements, refer to Automobile and Motor Vehicle Allowances (CRA).

🟦 Option 3: Create a Modest Meal Allowance

Offer a reasonable daily amount when employees must work away from base (e.g., $20–$25 per meal). If reasonable and linked to travel, CRA may allow it to be non-taxable.

🟥 Option 4: Treat as a Shareholder Benefit (T5)

If meals are mainly personal or habitual, record the total as a shareholder benefit (T5). The company loses the deduction but stays compliant.

🚗 The Out-of-Town Travel Days

A few times a month, Alex drives several hours to visit clients outside the city. These trips involve fuel, meals, and sometimes an overnight stay.

Because these costs are directly connected to earning business income, they are:

• Not taxable benefits to the employee, and
• 50% deductible to the company.

Always keep receipts with dates, destination, and business purpose — CRA considers this standard, low-risk business travel.

🧾 Understanding Meal Allowances — and Why “Travel” Doesn’t Mean “Anytime You Leave the Office”

A meal allowance can be a valid, deductible way to reimburse employees for meals they have to buy because of work, but CRA defines “travel for work” narrowly. This does not mean “every time you step out for a client meeting.”

🍱 CRA’s Definition of “Travel for Work”

1. The employee travels outside their normal municipality or metro area for business.
2. The trip is temporary and required for employment.
3. The meal is unavoidable because of that travel.

“Away from the office” is not the same as “away from home.” CRA’s test is whether the employee could reasonably return home for the meal.

💼 When Meal Allowances Can Be Deductible

• Contractor from Penticton to Vancouver for a full-day client visit.
• Technician working 80 km away for two days.
• Sales rep at a conference in another city.

🧮 Practical Comparison

Situation	CRA View	Reporting	Deductibility
Employee travels overnight or outside municipality	Non-taxable allowance	None	50%
Employee drives between local sites	Personal meal	T4 taxable benefit	100%
Daily flat “meal stipend” for local work	Taxable benefit disguised as allowance	T4	100%
Owner-manager uses card for local lunches	Shareholder benefit	T5	None

💼 Pulling It All Together

At year-end, Alex’s statements show a mix of coffees, travel meals, and local purchases. CRA will ask:

“Was this paid because of employment duties — or because of ownership?”

• If employment: report on T4 and deduct 100%.
• If ownership: report on T5, no deduction.
• If genuine business travel: no reporting, 50% deduction.

✅ The Takeaway

For small incorporated owners like Alex, the goal isn’t to eliminate every gray area — it’s to classify each transaction correctly.

• Employment benefit (T4): Transparent, fully deductible.
• Allowances: Only for bona fide travel outside your home area; 50% deductible.
• Shareholder benefit (T5): Personal or owner-only perks; not deductible.

By documenting purpose and applying these rules consistently, you can compensate fairly, claim legitimate deductions, and stay fully compliant with CRA.

📞 Need Help Sorting Meals and Taxable Benefits?

At Agate Bay Bookkeeping, we help BC business owners apply CRA’s taxable-benefit rules correctly — especially when employment and ownership overlap. Let’s review your expense policies and ensure every dollar charged to the company card is classified and deductible the right way.