25 February 2005 External T.I. 2005-0112171E5 - Clearly Marked Emergency-Response Vehicles

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.

Principal Issues: Whether a taxable benefit results in respect of the personal use of an employer-provided motor vehicle that is not considered an automobile because it is a clearly marked emergency-response vehicle by virtue of paragraph (b.1) of the definition of automobile in subsection 248(1) of the Act?

Position: If there is personal use, yes.

Reasons: Notwithstanding the fact that such an employer-provided motor vehicle may not be an automobile, a taxable benefit in respect of the personal use of such a vehicle may result.

Randy Hewlett
XXXXXXXXXX 613-941-7239
2005-011217
February 25, 2005

Dear XXXXXXXXXX:

Re: Clearly Marked Emergency-Response Vehicles

We are writing in response to your inquiry of January 19, 2005, wherein you asked for our opinion on whether a fire chief is in receipt of a taxable benefit for the personal use of a clearly marked emergency-response vehicle.

You indicated that the fire chief's personal use of the vehicle is restricted because he is required to respond to all emergency calls and is prevented from using the vehicle outside of town boundaries. When the fire chief is unable to respond to emergency calls (e.g., because of holidays or sick leave) the vehicle is parked at the fire department for emergency use by other personnel. You also indicated that the fire chief is responsible for residential and commercial permits and may have to visit property sites on the way to or from work or after hours, and that he does not use the vehicle to go home to lunch.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.

When an employer makes a motor vehicle available for an employee's personal use, it generally gives rise to a taxable benefit that must be included in the employee's income. In this regard, use of an employer-provided motor vehicle by an employee to travel between his or her home and regular place of employment is considered personal. This is so notwithstanding the fact that the vehicle may be required because an employee is on call for emergency purposes. However, where the employee proceeds directly from home to a point of call other than the employer's place of business to which the employee regularly reports or returns home from such a point, use of the vehicle is not considered personal. The CRA's general position on what constitutes personal use of an employer-provided motor vehicle is discussed in 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.

It is important to note that an employee may be in receipt of a taxable benefit for the personal use of an employer-provided motor vehicle even when the vehicle is not considered to be an "automobile" as defined in section 248(1) of the Income Tax Act (the "Act"). The classification of a motor vehicle as an automobile in this respect will only impact the provision of the Act that calculates the taxable benefit.

The taxable benefit for the personal use and availability of a motor vehicle that is considered an automobile is included in the employee's income under paragraph 6(1)(e) of the Act as a "standby charge", and will depend upon factors such as whether the automobile is available for the employee's use and its personal versus business use. Where the employer pays any of the operating costs of the automobile, an "operating cost benefit" is also included in the employee's income under paragraph 6(1)(k) of the Act. The taxable benefit for the personal use of a motor vehicle that is not an automobile is included in the employee's income under paragraph 6(1)(a) of the Act. The amount of the benefit is based on a reasonable calculation of the value of the benefit derived by the employee, which can vary in differing circumstances depending upon such factors as personal use.

A clearly marked emergency-response vehicle that is used in connection with or in the course of an individual's office or employment with a fire department or the police is not an automobile by virtue of paragraph (b.1) of the definition of automobile in subsection 248(1) of the Act. However, as noted above a taxable benefit may result if there is personal use of such a motor vehicle. Under the circumstances you described, however, we would have thought that if there is personal use by the fire chief, it would be minimal and the benefit would be negligible for income tax purposes.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch