CRA Vehicle, Travel, and Meal Expense Reassessments: Why CRA Denies Business Expenses and Increases Your Taxable Income — A Montreal CPA Firm Guide

Vehicle, travel, and meal expenses are among the most heavily audited and frequently denied deductions by the Canada Revenue Agency.
CRA closely examines these categories because they are:
• easy to over-claim
• common among self-employed individuals
• high-risk for “mixed personal and business use”
• often missing proper documentation
• commonly misclassified in bookkeeping

When CRA audits these expenses, they may deny a portion—or all—of the deductions, leading to reassessments, penalties, interest, GST/QST corrections, and immediate enforcement actions such as refund seizures, garnishments, or bank freezes.

This guide explains why CRA denies these expenses, how CRA evaluates business use, and how Mackisen protects taxpayers during expense audits and reassessments.

Legal and Regulatory Framework

Under the Income Tax Act and Excise Tax Act, expenses must be:
• reasonable
• incurred to earn business income
• supported by documentation
• exclusively or proportionately for business use
• properly allocated between personal and business use

CRA may deny expenses when:
• receipts are missing
• mileage logs are incomplete
• business purpose cannot be proven
• expenses are personal
• documents are illegible or inconsistent
• GST/QST numbers are invalid
• T2/T2125 filings conflict with GST/QST filings

CRA can reassess multiple years and charge penalties when documentation is weak.

Key Court Decisions

Courts repeatedly support CRA’s authority to deny vehicle and travel expenses. Key principles include:
• mileage logs are mandatory for vehicle claims
• estimates without evidence are not accepted
• meals must have a clear business purpose
• home-to-work travel is personal
• mixed-use expenses must be allocated properly
• undocumented travel is typically denied
• personal spending disguised as business is taxable
• GST/QST claims require valid invoices

Taxpayers carry the burden of proof.

Why CRA Denies Vehicle, Travel, and Meal Expenses

CRA flags these categories when:
• business use is overstated
• personal use is mixed with business
• credit card statements lack details
• cash expenses lack receipts
• Uber/Lyft/taxi mileage is inconsistent with income
• rental property visits are undocumented
• excessive restaurant claims appear
• mileage logs are missing or recreated
• corporation pays personal expenses
• shareholder loans are used improperly
• GST/QST is claimed on personal items
• employees are incorrectly treated as contractors

Quebec’s Revenu Québec is even stricter for GST/QST documentation.

How CRA Performs Expense Audits (Deep Expansion)

1. Vehicle Expenses

CRA reviews:
• mileage logs
• fuel receipts
• insurance
• repairs and maintenance
• leasing or financing statements
• commercial vs personal use
• vehicle used by shareholders
• corporate-owned vehicle rules

CRA frequently denies:
• home-to-jobsite mileage
• undocumented trips
• expenses without logs
• 100 percent business-use claims
• luxury vehicle costs
• undocumented repairs

2. Travel Expenses

CRA requests:
• flight tickets
• hotel bills
• itineraries
• proof of business purpose
• receipts matching travel dates
• meeting agendas
• digital calendars

CRA denies:
• undocumented travel
• personal vacations mixed with business
• spousal travel
• personal detours
• incomplete receipts

3. Meal & Entertainment Expenses

CRA reviews:
• restaurant receipts
• GST/QST invoices
• names of attendees
• purpose of meeting
• consistency with business revenue

CRA denies:
• meals without business purpose
• personal restaurant outings
• alcohol-heavy receipts
• cash receipts without detail
• vague purposes (“business meeting”)

4. GST/QST Cross-Audit

CRA checks that:
• GST/QST numbers are valid
• invoices include all required details
• ITCs match expense claims
• expenses were not claimed twice

GST/QST audits often accompany expense audits.

5. Enforcement After Reassessment

Once reassessed, CRA may:
• seize refunds
• freeze bank accounts
• garnish income or payments
• register liens
• seize GST/QST refunds
• issue RTPs to clients

Expense reassessments can escalate quickly.

Immediate Financial Risks

Expense audits can create significant risks, including:
• increased taxable income
• denied GST/QST ITCs
• interest and penalties
• wage garnishments
• bank freezes
• refund seizures
• corporate shareholder loan issues
• director liability (GST/QST)
• CRA expanding audit scope

Businesses with weak bookkeeping face the highest exposure.

Mackisen Strategy

Mackisen CPA uses a forensic and legal-based defence strategy for vehicle, travel, and meal audits.

Step 1 — Reconstruct Expense Records

We recreate proper documentation using:
• bank & credit card statements
• vendor invoices
• fuel logs
• vehicle usage analysis
• receipts reconstruction
• calendar/business event logs
• digital records and GPS data
• travel itineraries

This replaces missing documentation.

Step 2 — Build a Defensible Business Use Percentage

We calculate accurate usage using:
• mileage logs
• business trip mapping
• delivery/service routes
• logbook reconstruction

This reduces CRA’s disallowed amounts.

Step 3 — Reclassify & Correct Bookkeeping

We correct:
• personal expenses coded as business
• meal expenses that are non-deductible
• vehicle use errors
• GST/QST codes
• duplicate claims
• incorrect categorizations

This dramatically reduces reassessment exposure.

Step 4 — Prepare Legal & Accounting Brief

We prepare:
• audit rebuttal report
• business purpose documentation
• corrected expense schedules
• GST/QST corrections
• proof packages

This forces CRA to reconsider the reassessment.

Step 5 — File Objections

We file Notices of Objection with:
• legal arguments
• corrected calculations
• case law references
• detailed evidence

Many expense denials are reversible with proper defence.

Step 6 — Stop Collections

We negotiate:
• instalment plans
• enforcement holds
• partial freeze removals
• garnishment pauses

This protects taxpayers from immediate harm.

Step 7 — Long-Term Compliance Model

We implement systems for:
• mileage tracking apps
• expense documentation
• GST/QST compliance
• monthly bookkeeping review

This prevents future audits.

Real Client Experience

A Montreal real estate agent had 80 percent of vehicle expenses denied. Mackisen reconstructed a mileage log, provided business travel evidence, and overturned most of the reassessment.

Another client, an Uber driver, had CRA deny fuel, repairs, and meals due to missing logs. Mackisen rebuilt a complete mileage reconstruction and reduced the reassessment by more than 65 percent.

Common Questions

• Do I need a mileage log? Yes.
• Are meals fully deductible? No, generally only 50 percent.
• Can CRA deny undocumented vehicle expenses? Yes.
• Are travel expenses deductible? Yes, with strong documentation.
• Can CRA audit personal credit cards? Yes.
• Can CRA freeze my account over denied expenses? Yes.
• Can CRA reassess multiple years of expenses? Yes.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.