I have an incorporated accounting and tax practice (I’m the sole shareholder and only employee).
In the past when I’ve paid for a gym membership I have not expensed gym/recreational membership as per the ITA even though I have met clients as a result of the membership.
I don’t walk around soliciting my services. Conversations come up organically in the sauna/steam rooms and gym floor.
Most of the time the first question a person asks is what do you do and the rest is history.
Recently I moved to a very small town and purchased a membership at the small local gym for daily workouts.
However, there is a city about 30 mins from me with a large gym facility. I would like to get a membership there to meet potential clients - again in a more organic manner. I’m a regular gym goer and I find this type of environment comfortable.
I would like to know if I have a case to expense the gym membership in the city as to be honest it’s being purchased to expand my network and potentially get new clients. It’s very difficult to get new clients and expand my practice in a small town which is why I feel the additional membership in the city could help my practice grow.
You’d have a fight on your hands if the CRA asked about it.
11. Subparagraph 18(1)(l)(ii) prohibits the deduction of any expense incurred by the taxpayer in respect of membership dues (whether initiation fees or otherwise) which entitle the taxpayer, the taxpayer’s employees or anyone else to use the facilities of any club, the main purpose of which is to provide dining, recreational or sporting facilities for its members.
When determining the main purpose for which a club was organized, the instruments creating the club, such as the content of the club’s by-laws to regulate its affairs, are to be considered. Also of importance in this determination is whether more than 50 percent of the club’s assets are used in providing dining, recreational or sporting facilities.
¶ 12. The payment or reimbursement of club dues or membership fees by an employer would generally be considered to be a taxable benefit to the employee. However, as indicated in the current version of IT-470, Employees’ Fringe Benefits, if an employer pays the fees required for an employee to be a member of a social or athletic club, the employee is not considered to have received a taxable benefit when the membership is principally for the employer’s advantage rather than the employee’s. The use of an in-house recreational facility or a physical fitness facility that is owned by the employer for the use of the employees does not usually give rise to a taxable benefit to the employees. In addition, no taxable benefit will generally arise to the employees if the employer pays a related or unrelated organization to provide such facilities, as long as the facilities or membership is available equally to all employees. On the other hand, if the club membership is in the nature of a fringe benefit with little or no advantage to the employer’s business, then the cost of membership is considered to be a taxable benefit to the employee and included in the employee’s income, even though the dues or fees are not deductible by the employer because of paragraph 18(1)(l). The onus is on the employer and employee to establish that membership in the facility is primarily to the employer’s advantage."
You might possibly be able to have your company pay the dues to you as a employee benefit and then have it be not taxable to you under the “primarily to an employers advantage” but I’d think you’d have to have other employees that you extend the same benefit to that also bring in a lot of business… From IT-148R3
You mentioned that you did not deduct gym membership in the past as per the ITA, which is correct. A 30-minute drive does not change the ITA.
You can claim whatever you like until it is questioned and CRA reviews it, however, I wouldn’t.
In my humble opinion, i have better things to do than argue with CRA over such a nominal expense. I would just pay it personally and enjoy the fact I will meet some new people who may become clients.
One could argue everywhere I go, someone new I meet asks what I do for a living. Thus making everyplace I go with my kids, every movie or show, the grocery store, funerals, etc is a potential to meet new clients. This does not mean all mileage is a deduction and every entry fee can be used as a business expense.
My initial thoughts were not to expense the additional gym membership, however, I figured it would not hurt to ask. Also, it is a nominal amount of money and will easily be covered by acquiring just one new client.
No, still not something you could claim. By your logic, I could claim every Uber trip I ever take because it will inevitably lead to me giving my driver advice, or getting them as a client. The same thing happens when I go to the dentist, that doesn’t make my dental visit a business deduction
Still not tax deductible, as everyone has said. But that doesn’t mean it is a personal expense. I think there is an argument to be made for the company paying for it but not deducting it (S1 addback).
No reason to spend after-personal-tax dollars when you can spend after-business-tax dollars IF it is an actual business expense more than a personal expense. CRA’s only challenge would be that it is more personal in nature than business (and therefore is a shareholder appropriation), if you had staff and the company paid for all the employee’s memberships then paying for yours would be “because of employment” instead of a shareholder appropriation.
I probably wouldn’t recommend a client try it if they were the only employee in their company, because they’d have to pay my bill to fight the audit… but I might try it in my own company if I felt strongly about it.
This community has always pointed me in the right direction. Therefore, I will not expense the additional membership although it will lead to new clients.
