CRA releases its new policy on the computation of aircraft-use benefits

Today, CRA released to various interested parties its policy on the computation of taxable benefits arising from the personal use of aircraft, which will be effective for individual taxation years commencing after 2017 (unless the taxpayer agrees to its earlier application). This policy is generally less favourable than that in (cancelled) IT-160R3 under which, for example, the benefit could be computed based on the cost of a first-class ticket in a wider range of circumstances (and for a “small, inexpensive aircraft,” might be based on an economy class fare) – and there was no mention of an imputed available-for-use benefit based on the aircraft’s cost.

According to CRA, in computing the value of the taxable benefit arising from the personal use of a corporation’s or employer’s aircraft by its shareholders or employees, there are three main scenarios to consider:

1. When the shareholders or employees take a flight on the aircraft where there is a business purpose for their presence on the flight, and there is a personal purpose for others taking the flight, the value of the taxable benefit for the latter personal use would be equal to the highest priced ticket available in the marketplace for an equivalent commercial flight.
2. When the shareholder or employee takes a flight on the aircraft where there is no business purpose for the flight, the value of the taxable benefit is equal to the price of the charter of an equivalent aircraft for an equivalent flight (with this amount being split between the relevant individuals). However, in the employee case, where “an open market charter is not a viable option based on the unique circumstances of the flight, for example there are demonstrable bona fide security concerns for the employee, the taxable benefit will be computed pursuant to scenario 1 for that particular flight.”
3. Where the shareholder or employee uses the aircraft primarily for personal purposes relative to the aircraft’s total use during the calendar year (taking into account use by non-arm’s length persons), the value of the taxable benefit is equal to the personal use portion of the aircraft’s operating costs plus an imputed available-for-use amount. To compute the available-for-use amount for an owned aircraft, you first multiply the aircraft cost by an imputed monthly interest rate (generally, that under Reg. 4301(a).) The operating benefit and the available-for-use amount are then computed by multiplying the respective costs by the personal use portion relative to the total use portion based on the aircraft log book or other evidence.

Neal Armstrong. Summary of AD-18-01: 2018-03-07 Taxable Benefit for the Personal Use of an Aircraft under s. 6(1)(a).