8 February 2012 External T.I. 2011-0422901E5 - Parking Expenses

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 the parking provided by the employer would be a taxable benefit to the employee. Does the situation described meet the definition of "scramble parking"?

Position: General comments provided.

Reasons: A question of fact on a case-by-case basis whether the primary beneficiary is an employer or an employee.

XXXXXXXXXX
							2011-042290
							Andrea Boyle

February 8, 2012

Dear XXXXXXXXXX :

Re: Taxable Benefit - Parking

I am writing in response to your fax of September 29, 2011 regarding whether employer-provided parking would be considered a taxable benefit in your particular situation. We apologise for the delay in our response.

You have indicated that you drive an employer-provided vehicle which you park in a lot owned by your employer. You use this vehicle to carry out your duties of employment which include XXXXXXXXXX on average five or more times a week. You have also indicated that in your view the parking lot only offers "scramble parking" because there are over 30 percent more passes than available stalls and no stalls are assigned.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. We are however prepared to provide the following general comments in respect of the issue that you raised.

Employer-provided parking generally constitutes a taxable benefit to the employee whether or not the employer owns the lot. The amount of the benefit is based on the fair market value of the parking minus any payment the employee makes to use the space.

Scramble Parking

Generally "scramble parking" exists where there are significantly fewer spaces than there are employees who want parking and the spaces are only available on a first-come, first-served basis. Although a benefit is conferred to an employee in scramble parking situations, its value to any particular employee is difficult to determine and therefore, the Canada Revenue Agency ("CRA") has administratively decided not to require the reporting of such a benefit.

It is always a question of fact depending upon all the actual facts and circumstances in each particular case whether or not scramble parking exists. While we don't have any formal guidelines on how to make the determination of whether or not a scramble parking situation exists, some possible considerations in making this determination include:

• How many employees actually use the parking at any given time, taking into account whether there is shift work, and/or that on a given day a number of employees will be absent because they are not working in the office or they are off due to vacation days, sick days etc.
• Whether the parking lot is full at various times during the day.
• On an average day whether there are people who don't get a spot and whether most, if not all, people get spots.
• Whether the workplace is in a downtown area with alternative parking. It may be difficult to have scramble parking in a downtown area with alternative parking available.

In other words, in determining whether there is scramble parking, it is not enough to say that that there are over 30% more passes than available stalls. This is because a true scramble parking situation does not exist simply because there would be an insufficient number of space if every employee were to arrive at the same time. The more important question is whether an employee is actually likely to get a parking spot on a given day.

It is an employer's responsibility to determine whether the criteria for scramble parking are met. Where advice or assistance is required, the employer is generally advised to contact their Tax Services Office and request an evaluation of their parking situation.

Ultimately, of course, an auditor may come in and review the actual situation and, if the criteria for scramble parking are not met, the employees could be reassessed a taxable benefit. During an audit, the auditor will examine the facts surrounding the provision of parking and may, for example, visit the parking lot at various times during the day to see if it is it full or whether there are many vacant spaces.

Business Purposes / Duties of Employment

It is also the CRA's position that a taxable benefit will not exist where an employee is provided with parking for business purposes and is regularly required to use his or her own vehicle (or a vehicle provided by his or her employer) to perform his or her employment duties. As per the CRA publication T4130 Employers' Guide Taxable Benefits and Allowances, from the employer's perspective there is no taxable benefit for an employee when both of the following conditions are met:

• You provide parking to your employees for business purposes.
• Your employee regularly has to use his or her own automobile or one you usually supply to do his or her duties.

We have previously suggested, as a general guideline, that if an employee is required to use his or her automobile three or more days on a weekly basis for employment related travel and requires a parking space for this purpose, that the parking space would be considered to be used "regularly" for employment-related purposes. Additionally we recognize that a vehicle can be used less than "regularly" for business purposes, in which case a pro-ration of the benefit can be made as indicated on the CRA web site at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/tmbl/prkng/dfntns-eng.html#buspurp

We consider "regularly" to be an average of three or more days per week. If the employee requires the use of a vehicle for business purposes less frequently, we will accept a pro-ration of the benefit. For example, if the employee uses a vehicle in the course of his or her duties one day per week, the value of the parking may be reduced by 20%, since the employee required a spot for business purposes 20% of the time.

One of the key questions to be answered in determining whether employer-provided parking is a taxable benefit to an employee is: who is the primary beneficiary of the parking spot? In other words, was the employee's enjoyment of the parking privileges afforded by the free or below fair market value parking ancillary to the benefit derived by his employer? This determination of who is the primary beneficiary of the parking benefit requires an evaluation on a case-by-case basis.

In the Tax Court of Canada decision in Adler et al v The Queen 2007 TCC 272, the court considered whether parking was provided to a number of employees for business purposes. The court considered whether the employer was the primary beneficiary of the benefit afforded by a parking pass provided to a number of the employees. In that case it was determined that a particular employee used the employer-supplied vehicle for business purposes because it found that "the free parking was provided as an accessory to facilitate its efficient use". The enjoyment or personal benefit flowing to the employee was considered ancillary to the benefit accruing the employee bearing in mind the extent of his travel and the probable cost of alternative transportation to achieve those business purposes.

In evaluating a particular situation we would therefore need to consider whether the parking was provided pursuant to the nature of the duties performed by the employee (Is an employee compelled by the nature of his or her employment to drive to work?) Where the vehicle being driven is an employer-provided vehicle it would likely be relevant to examine why the employer has chosen to provide a vehicle to the employee. We would need to determine whether the vehicle and parking provided to the employee are primarily for the convenience of the employer or the employee and what are the relative economic benefits received by the employer and the employee.

It is possible that the criteria in the T4130 Employers' Guide Taxable Benefits and Allowances might be met in your specific situation but we can not provide a definite determination because, as you can see from our comment above, all the facts and circumstances would need to be examined and a determination would need to be made on an employee-by-employee basis. However, if the criteria in the T4130 are met, an employee would not be considered the primary beneficiary of the parking benefit and no taxable benefit would result from the provision of the parking spot.

Modification of a T4 Slip

Where it is determined that an employer has incorrectly included an amount on an employee's T4 slip (and the employer agrees that an error has been made) the employer should prepare an amended T4 slip a copy of which would then be sent to the CRA and to the affected employee. Where the taxpayer has already filed his or her return, the employee can request an adjustment for a taxation year by sending either a completed Form T1-ADJ - T1 Adjustment Request, or a signed letter with all the information with respect to the adjustment, to the employee's tax centre.

When an employee disagrees with the amounts reported on a T4 slip, even after he or she has made a reasonable effort to contact and/or resolve his compliant with the employer, then the employee can request an Employee Complaint Registration Form from individual income tax enquiries (contact phone numbers are available on the CRA we site at: http://www.cra-arc.gc.ca/cntct/phn-eng.html). This Form is provided to the employee and he or she then returns the completed form to his or her tax centre.

We trust these comments will be of assistance.

Yours truly,

Doug Watson
for Director
Business and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch