CRA states that a PSB can deduct the “cost” of car loan interest under s. 18(1)(p)(ii) to the extent of the benefit conferred on the individual qua employee rather than shareholder – but not CCA
Under s. 18(1)(p)(ii), a corporation carrying on a personal services business is entitled to deduct “the cost to the corporation of any benefit … provided to an incorporated employee … that would, if the income of the corporation were from a business other than a [PSB] be deductible in computing its income.” CRA was asked whether this permitted the corporation to deduct the costs of leasing an automobile provided to the individual, or interest on a loan financing an automobile provided to the individual.
The word “cost” was less than apt to describe loan interest. Nonetheless, CRA was of the view that, in either situation, the leasing or interest “cost” was deductible to the extent of any related benefit provided to the individual qua employee (provided that the general deductibility tests were satisfied), whereas there could be no such deduction if the auto was provided to the individual qua shareholder.
CRA went on to indicate that no CCA could be claimed by the corporation (stating that “a capital cost allowance amount is not the cost of a benefit”) – except that if the corporation had a sales business, CCA could generally be deducted under s. 18(1)(p)(iii) to the same extent as CCA claims could have been made under s. 8(1)(j)(ii) if the marketing activity had been carried on by the individual as a sales employee.
Neal Armstrong. Summary of 9 March 2020 External T.I. 2013-0490301E5 F under s. 18(1)(p)(ii).