11 July 2006 Ministerial Correspondence 2006-0179141M4 - Motor Vehicle Allowances

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: Would an allowance paid to an employee for the use of his or her vehicle be considered a taxable benefit when a replacement employee uses the vehicle?

Position: No, provided the employee is incurring all the costs of operating the vehicle and does not receive any compensation from his or her replacement toward the operating costs.

Signed on July 11, 2006

XXXXXXXXXX

Dear XXXXXXXXXX:

The Honourable Carol Skelton, Minister of National Revenue, has asked me to reply to your letter addressed to your Member of Parliament, XXXXXXXXXX, concerning the taxable status of motor vehicle allowances paid by your employer to its employees and individuals who temporarily replace the employees when they are on vacation. Minister Skelton received a copy of your letter from XXXXXXXXXX on March 30, 2006. I apologize for the delay in responding.

In your letter, you express concern that your employer's method of not paying its employees directly when their replacements are using the employees' vehicles is based on a ruling of the Canada Revenue Agency. While your employer's method of paying the replacements directly is acceptable for income tax purposes, a direct payment of the allowance to employees would also be acceptable provided the employees are incurring all the costs of operating the vehicles and do not receive any compensation from their replacements toward the operating costs.

I trust that the information provided is helpful.

							Sincerely,

							Brian McCauley
							Assistant Commissioner
							Legislative Policy and
							  Regulatory Affairs Branch

c.c.: XXXXXXXXXX
House of Commons
Ottawa ON K1A 0A6

Shaun Harkin
957-9229
2006-017914