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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether a standby charge benefit applies where an employee's personal use of an automobile of the XXXXXXXXX is restricted to direct travel by the employee between his or her home and regular place of work.
Position TAKEN:
Yes.
Reasons FOR POSITION TAKEN:
The CCRA's position, which is supported by the Courts, is that travel between an employee's residence and his or her regular place of work is personal (see paragraph 5 of IT-63R5). In our view, an employee's requirement to take an employer provided automobile home, for reasons of security of the automobile, does not diminish the benefit received by the employee in traveling between home and the regular work place in an employer-provided automobile (i.e., such a requirement does not change the personal nature of such travel). Regardless of the use, or the non-use, of the automobile, once it has been made available to the employee, that individual is still subject to the calculation of the standby charge for each day the vehicle is made available to him or her. However, in cases where the personal use is restricted to the drive to and from work, there is an increased likelihood that the total personal kilometres will be sufficiently low so as to entitle the employee to the reduced standby charge explained in paragraph 8 of IT-63R5.
XXXXXXXXXX 2000-001965
M. Azzi
July 6, 2000
Dear Sirs:
Re: Standby Charge Benefit
This is in reply to your letter of April 6, 2000, wherein you request confirmation on whether a standby charge benefit applies where an employee's personal use of an automobile of the XXXXXXXXXX is restricted to direct travel by the employee between his or her home and the workplace. In this regard, you specify that, for security reasons, the employees are charged with taking the XXXXXXXXXX vehicles home, but are not authorized to operate the vehicles for personal use, other than direct transport between their homes and work. You also request confirmation that the same standby charge benefit requirements apply uniformly to all taxpayers, as you are concerned that there may be inconsistencies between various organizations in reporting the benefit.
The Income Tax Act provides that the value of the benefits derived by an employee from the personal use and availability of an automobile supplied by an employer is required to be included in calculating the employee's income. We have enclosed a copy of Interpretation Bulletin IT-63R5 which explains the rules and calculations relating to automobile benefits for employees. Generally, the value of automobile benefits is an amount equal to a prescribed amount per kilometre for operating costs in connection with personal use, and a "reasonable standby charge". In general terms, this standby charge is 2% per month of the cost of the automobile, or 2/3 of the lease costs, calculated with reference to the number of days during which the automobile was made available to the employee or to a person related to the employee.
However, as explained in paragraph 8 of IT-63R5, the standby charge may be reduced when the personal use is less than 1,000 kilometres a month and the employment use portion of the total kilometres travelled is 90% or more. Further, provided the automobile is used primarily for employment purposes, an amount equal to one-half of the standby charge benefit may be used as the amount of the operating costs benefit in lieu of the prescribed per kilometre calculation.
The Canada Customs and Revenue Agency ("CCRA") takes the position, which is supported by the Courts, that travel between an employee's residence and his or her regular place of work is personal. An individual's place of work is considered to be the place where the individual reports for work. However, as indicated in paragraph 5 of IT-63R5, an exception occurs where (as required by the employer or with the employer's permission) the employee proceeds directly from home to a point of call other than the employer's place of business to which the employee reports regularly (e.g., to make repairs at customers' premises), or returns home from such a point. These particular trips are not considered to be of a personal nature.
In our view, an employee's requirement to take an employer provided automobile home, for reasons of security of the automobile, does not diminish the benefit received by the employee in traveling between home and the regular work place in an employer-provided automobile (i.e., such a requirement does not change the personal nature of such travel). Regardless of the use, or the non-use, of the automobile, once it has been made available to the employee, that individual is still subject to the calculation of the standby charge for each day the vehicle is made available to him or her. In this regard, it is our view that an automobile is available for use by an employee as long as the employee has access to, or control over, the vehicle, and access is considered to end when an employee returns the keys of the automobile to the employer. We would also note, however, that in cases where the personal use is restricted to the drive to and from work, there is an increased likelihood that the total personal kilometres will be sufficiently low so as to entitle the employee to the reduced standby charge noted above. We would therefore recommend that employers and employees maintain detailed daily logs to support the amount of employment-related use.
Accordingly, as requested, we confirm that a standby charge benefit will apply even though a XXXXXXXXXX employee's personal use of an automobile of the XXXXXXXXXX is restricted to direct travel by the employee between his or her home and regular place of work, in accordance with the rules explained above. As regards your second concern, while we are not in a position to comment on the practices of other organizations, we can confirm that the above automobile benefit provisions of the Act apply to all taxpayers. It should also be noted that since our tax system is based on self-assessment, it is the employer's responsibility to determine, having regard to the income tax law and to the policies of the CCRA, whether an employee has received a taxable benefit.
In closing, we would stress that the role of the CCRA is to administer and enforce the Act as passed by Parliament. The tax policy concerns you have with respect to the automobile benefit provisions, and any request for amendments to the Act, are the responsibility of the Department of Finance. Should you wish to pursue such concerns further, you may contact the Tax Policy Branch of the Department of Finance by writing to L'Esplanade Laurier, 140 O'Connor Street, Ottawa, Ontario K1A 0G5.
We trust that these comments will be of assistance.
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
??
- 3 -
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2000
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2000
Email this Content