15 November 2000 External T.I. 2000-0030225 - EMPLOYEE REIMBURSING EMPLOYER FOR CAR

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: The income tax consequences if the employer charged the employee for the personal use by him or her of the company vehicle.

Position: If an employee reimburses the employer an amount for the standby charge, the standby charge otherwise calculated is reduced by the amount of this reimbursement. Similarly, if an employee reimburses the employer for the operating costs of the company vehicle in respect of the personal use of this vehicle by the employee, the operating cost benefit otherwise calculated is reduced by the amount of the reimbursement provided it is made in the year or within 45 days after the end of the year.

Reasons: Subparagraph 6(1)(e)(ii) of the Act and the definition of Amount B in paragraph 6(1)(k) of the Act respectively.

XXXXXXXXXX 	J. Gibbons, CGA
		2000-003022
November 15, 2000

Dear XXXXXXXXXX:

We are replying to your letter of May 19, 2000, received by the Toronto North Tax Services Office and forwarded to us for reply. You enquired whether an employer had to report an amount in box 34 of the employee's T4 slip (i.e., automobile benefits), if the employer charged the employee for the personal use of the company vehicle. You indicated that the amount charged by the employer is more than the total of the standby charge and the employee's share of operating costs.

As you may be aware, it is your employer's responsibility to determine and report employment income, which includes taxable benefits for the use of the employer's car. Because of the employer's reporting responsibilities, we suggest that you see your employer about any perceived discrepancies with the calculation of your taxable benefits. If you and your employer do not agree on the matter, we suggest that you contact officials in your local tax services office to help resolve your differences. We have provide some general comments, which should be helpful to you.

The requirement to include in income the value of benefits derived by an employee from the personal use and availability of a motor vehicle supplied by an employer is based on rules set out in the Income Tax Act (the "Act"). Interpretation Bulletin IT-63R5, "Benefits, Including Standby Charge for an Automobile, from the Personal Use of A Motor Vehicle Supplied by an Employer - after 1992," explains these rules in detail. You can obtain a copy of this bulletin and other publications on our website at www.ccra-adrc.gc.ca.

If a vehicle being used is an "automobile," which is defined in subsection 248(1) of the Act (see paragraphs 2 - 4 of IT-63R5), the value of the employee benefit for personal use of the employer's automobile consists of a standby charge and an operating expense benefit pursuant to paragraphs 6(1)(e) and 6(1)(k) of the Income Tax Act respectively. Since your enquiry concerns these latter benefits, we will presume for the purposes of responding to your enquiry that the vehicle in question is your employer's automobile.

If an employee reimburses the employer for the standby charge, the standby charge otherwise calculated is reduced by the amount of the reimbursement under subparagraph 6(1)(e)(ii) of the Act. This rule is explained in paragraph 10 of IT-63R5 and is reflected in the worksheet for calculating the standby charge on page 9 in the 1999-2000 "Employer's Guide - Taxable Benefits."

Similarly, if an employee reimburses the employer for the operating costs of the company vehicle in respect of the personal use of this vehicle by the employee, the rules in paragraph 6(1)(k) of the Act provide that the operating cost benefit otherwise calculated is reduced by the amount of the reimbursement. However, the rules in paragraph 6(1)(k) stipulate that the reimbursement of operating expenses by the employee must be paid in the year or within 45 days after the end of the year. This rule is explained in paragraphs 6 and 7 of IT-63R5 and on page 7 of the 1999-2000 "Employer's Guide - Taxable Benefits."

We trust that these comments will be of assistance.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate

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