In the last year or so there have been dozens of court challenges to the Canada Customs and Revenue Agency’s (CCRA’s) suggested $33 daily meal allowance for truck drivers. Chris Bennett, general manager of Transport Financial Services in Waterloo, Ont., says his firm has been aggressively challenging the amount of the daily allowance with regular success.

“CCRA has accepted all of our clients’ returns, as filed, with no fuss whatsoever,” Bennett says. He adds that in rulings involving employee truck drivers, the Tax Court of Canada has been definitively on the side of the driver — that the $33 suggested by the CCRA’s Employment Expense Guide T4044 (E) falls short of an amount reasonably expected to support a working adult’s daily nutritional intake.

What the court hasn’t done — and likely won’t do — is define “reasonable.”

Bennett’s company, a financial services firm that specializes in trucking, advises owner-operators to take the guesswork out of the equation and define “reasonableness” for themselves by incorporating their business and taking advantage of a daily meal allowance commonly used by almost anyone who travels on business.

Incorporating will change the way you manage your operation, bringing better tax, business, and estate-planning benefits, too, says Bennett.

Once incorporated, your relationship with your business changes. You wear two separate hats: president and employee. And like any other employee working in an industry that demands travel, you become one of the many taxpayers who routinely receive a per-diem allowance as reimbursement for travel expenses.

Here’s how a per diem strategy works:

1. CCRA’s 50 per cent clawback for personal meals is absorbed by your corporation’s tax rate — 19 per cent, compared to your personal marginal tax rate of at least 30 per cent. For example, on $10,000 of meal claims, your corporation pays an additional tax burden of $950 compared to a proprietorship O/O who pays, at minimum, an additional $1,500 to $2,400 because of the 50 per cent clawback rule.

2. The per diem paid to you from your corporation does not have to be reported on your personal income tax return (T-1).

3. The per-diem method allows (assuming a 250-day work year) you to expense up to $6,750 more than the TL2 method — without keeping receipts.

4. The tax savings for a typical O/O are from $2,500 to $3,000 each year using the per-diem method over the TL2 method.

Bennett says his company already has pushed test cases into court to prove its assertion that CCRA can’t prohibit truckers from going this route. As for the expense of incorporating, Bennett says that in almost every case the costs are returned three-fold in the first year.

As for how much you’ll be able to claim, he says it becomes a matter of what’s reasonable under the circumstances.

“As the president of your corporation, you decide how much of an allowance your employee — you — should be entitled to on a daily basis,” Bennett says. “That’s paid out at 100 per cent to the employee, who isn’t required to report it as income, and the corporation deals with the 50 per cent clawback issue.”

For details about owner-operator incorporation and a per diem strategy, talk to your accountant or call Bennett at Transport Financial Services, 1-800/461-5970.