9 March 2005 External T.I. 2005-0118641E5 - Employment Benefit Motor Vehicle Travel Allowance

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 motor vehicle allowance to commute daily from home to work is taxable when it is paid to a XXXXXXXXXX who is employed for a XXXXXXXXXX period in the summer as a XXXXXXXXXX ?

Position: Yes.

Reasons: Paragraph 6(1)(b) of the Act includes the allowance in income. Subsection 81(3.1) of the Act cannot apply because the distance between the employee's home and the work location is less than 80 kilometres.

XXXXXXXXXX Randy Hewlett
613-941-7239
2005-011864
March 9, 2005

Dear XXXXXXXXXX:

Re: Employment Benefit - Motor Vehicle Travel Allowance

We are writing in response to your letter of November 8, 2004 to the Summerside Tax Centre, wherein you asked for our opinion on the taxable status of a travel allowance you received while employed by XXXXXXXXXX as a XXXXXXXXXX.

Your letter indicated that you are a XXXXXXXXXX who was employed by the XXXXXXXXXX during the summer of 2004 for a XXXXXXXXXX period as a XXXXXXXXXX. You used your personal motor vehicle to commute daily from your home in XXXXXXXXXX to a location in Toronto where the XXXXXXXXXX. You were paid a travel allowance of $XXXXXXXXXX per-kilometre for the daily travel, which we understand was included in your total employment income for the period. You inquired why the allowance you received was taxable but the same allowance received by some other XXXXXXXXXX who were employed at the same location and who resided in different communities, was not taxable.

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. It should also be noted that the confidentiality provisions of the Income Tax Act (the "Act") preclude us from discussing or providing any information about another taxpayer's income tax matters without his or her written authorization. We are prepared, however, to provide the following general comments.

An allowance or reimbursement of expenses in respect of an employee's travel between his or her residence and place of employment must generally be included in employment income by virtue of subsection 6(1) of the Act. There are, however, some exceptions to this general inclusion rule. For example, subsection 6(6) of the Act excludes certain transportation benefits in respect of employment at a special work site or remote work location. One of the requirements of subsection 6(6) of the Act is that the employee be away from his or her principal place of residence for 36 hours or more at a time. Consequently, this exception could not apply in respect of an employee who commutes daily.

There is also an exception in subsection 81(3.1) of the Act that excludes from employment income a reasonable allowance or reimbursement of expenses for the personal travel of a part-time employee. In our view, this is the only exception in the Act that could possibly exclude from income a motor vehicle allowance received by someone in your situation. One of the requirements for this exception to apply, however, is that the employment duties are performed at a location not less than 80 kilometres from the part-time employee's ordinary place of residence. It is apparent that the distance between your ordinary place of residence and the location where you XXXXXXXXXX is less than 80 kilometres and consequently, this exception would not apply to you. This may explain why your employer included the motor vehicle allowance you received in your employment income.

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