Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Whether employees who use company vehicles must include an amount as a taxable benefit on their T4's.
Position: Generally, the value of a benefit derived by an employee from the personal use and availability of a motor vehicle supplied by an employer is required to be included in calculating the employee's income by virtue of paragraphs 6(1)(a), 6(1)(e) and 6(1)(k).
Reasons: As stated in paragraph 5 of Interpretation Bulletin IT-63R5, personal use of a motor vehicle includes travel between the employee's home and usual place of work. The fact that an employee is required or asked by the employer to take the automobile home after work does not change the personal nature of such travel.
XXXXXXXXXX J. Gibbons
1999-001366
Attention: XXXXXXXXXX
April 27, 2000
Dear XXXXXXXXXX:
We are replying to your facsimile of December 2, 1999, in which you requested our views whether or not employees would be in receipt of a taxable benefit when using an employer's vehicle.
As requested, we have provided some comments below. However, we cannot confirm the tax implications of particular transactions unless the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Thus, our comments are of a general nature only. Further, you should note that since our tax system is based on self-assessment, an employer must normally determine on its own, having regard to income tax law and the policies of the Canada Customs and Revenue Agency, whether an employee has received a taxable benefit. However, employers may obtain assistance on the amounts to be included on an employee's T4 for a particular situation from the local tax services office.
Generally, the value of a benefit derived by an employee from the personal use and availability of a motor vehicle supplied by an employer is required to be included in calculating the employee's income. We are enclosing Interpretation Bulletin IT-63R5, "Benefits, Including Standby Charge for an Automobile, from the Personal Use of A Motor Vehicle Supplied by an Employer - after 1992," which fully explains the calculation of motor vehicle benefits for employees.
If a vehicle being used is an "automobile" (see paragraphs 2 - 4 of IT-63R5 for the definition of this term), the value of the employee benefit for personal of the employer's automobile consists of a standby charge and an operating expense benefit pursuant to paragraphs 6(1)(e) and 6(1)(k) of the Act respectively. (Paragraphs 6 - 14 of the enclosed bulletin explains the calculation of these amounts.) As stated in paragraph 5 of Interpretation Bulletin IT-63R5, personal use of a motor vehicle includes travel between the employee's home and usual place of work. The fact that an employee is required or asked by the employer to take the automobile home after work does not change the personal nature of such travel. Also, the fact that an employee travels to his or her residence with a vehicle provided by the employer from the regular place of work, but remains on call as part of the employment contract, does not change the personal nature of the trip. It is our view, however, that an exception occurs where (as required by the employer or with the employer's permission) the employee proceeds directly from home to a point of call other than the employer's place of business to which the employee reports regularly (e.g., to make repairs at a customer's premise), or returns home from such a point. These particular trips are not considered to be of a personal nature.
It is our view that where an employee stops to perform a work-related function during the trip from home to work or vice versa, for example, stopping at a bank or a client's place, whether at the employers' request or with the employer's permission, the trip is normally considered as personal. In cases where travel includes both a personal element and an employment element, we consider the primary purpose of a particular trip in determining whether it is personal in nature or employment-related. The primary purpose of any trip is always a question of fact. Since the circumstances are likely to differ from one case to the next, we have not established any specific criteria or guidelines in this regard.
For purposes of calculating the standby charge, an automobile is considered to be available to the employee if it is used by the employee all day or for any part of the day or even if the automobile sits unused in the employee's driveway. This is based on our view that an automobile is available for use by an employee as long as he or she has access to, or control over, the vehicle. Access is considered to end when an employee returns the keys of the automobile to the employer. A personal use policy which prohibits personal usage of the vehicle, other than driving to and from work, does not constitute making the automobile unavailable to the employee. However, in cases where the personal use is restricted to the drive to and from work, there is an increased likelihood that the total personal kilometres will be sufficiently low as to entitle the employee to a reduced standby charge. We would recommend that employers and employees maintain detailed daily logs to support the amount of employment - related use. Further, where an employee is only infrequently and irregularly provided with a vehicle by an employer for the sole purpose of specified business travel, such as meeting with an out-of-town client or attending a training course or conference, there would likely be no benefit included in that employee's income as a result of having taken that vehicle home on the day before the specified business travel and returning it the first morning following the day which concludes the business travel.
If a motor vehicle does not qualify as an "automobile," an employee will be considered to have received a taxable benefit for personal use of the motor vehicle under the general provisions of paragraph 6(1)(a). (See paragraphs 23 - 24 of the enclosed bulletin.) Vans and pick-up trucks that are used primarily to haul goods and equipment are examples of vehicles that may not qualify as automobiles, depending on the facts. Where a motor vehicle other than an automobile is essential to the employer's business operation, and its only personal use is to provide transportation between an employee's residence and the employer's business premises, it may be appropriate to calculate the benefit to the employee on a cents-per-kilometre basis for equivalent automobile transportation. The rates prescribed in section 7306 of the Income Tax Regulations will usually be accepted in this situation.
Where an employee uses his or her own vehicle to earn income from an office or employment, the employee may be entitled to deduct a portion of his or her vehicle expenses. (We have enclosed IT-522R, "Vehicle, Travel and Sales Expenses of Employees," which explains this deduction in detail.) Employees who are ordinarily required to carry on the duties of the office or employment away from the employer's place of business or in different places and, under the contract of employment, are required to pay travel expenses incurred in the performance of the duties of the office or employment may be eligible to deduct vehicle expenses by virtue of paragraph 8(1)(h.1) of the Income Tax Act. (See paragraphs 5 - 9 of IT-522R for the calculation of vehicle expenses.) However, an employee will not be entitled to a deduction under this paragraph if he or she received an allowance for motor vehicle expenses that was excluded from income by virtue of paragraph 6(1)(b) or if the employee claimed a deduction for the year under paragraph 8(1)(f), i.e., sales expenses. In order to claim vehicle expenses under paragraph 8(1)(h.1), the employee must obtain a form T2200, Declaration of Conditions of Employment, signed by the employer certifying that the conditions set out in paragraph 8 (1)(h.1) were met for that year. The T2200 should be kept with the taxpayer's records for examination on request. Finally, our comments above concerning the Agency's position on what constitutes personal travel for purposes of determining the taxable benefit for use of an employer's vehicle applies equally in determining an employee's deduction for vehicle expenses.
We trust that these comments will be of assistance.
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Enclosure
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