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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
PRINCIPAL ISSUE:
1. Would an employer paying the cost of a safe or defensive driving course for employees constitute a taxable benefit?
2. Would the cost be deductible to the employer?
3. Must GST be charged on the fees by the school?
Position TAKEN:
1. General comments provided.
2. General comments provided.
3. Referred to GST Rulings Directorate.
Reasons:
1. Question of fact. Depends on who is the primary beneficiary of the lessons.
2. Question of fact. Depends on whether the payments are incurred to earn income.
3. GST issues.
XXXXXXXXXX T. Young, CA
2003-000286
March 25, 2003
Dear XXXXXXXXXX:
Re: Driving School
We are writing in response to your letter of January 15, 2003, regarding a proposed company that would operate a school for safe or defensive driving techniques.
In your letter, you state that the customer base for this endeavour would be corporate employers that require their staff to drive for business purposes, where there have been accidents, resulting in time lost from work and high insurance and repair costs.
You have asked us the following questions:
? Would the cost of driving lessons be a taxable benefit to the employees?
? Would the cost for employees be a deductible expense by the payor corporation as a business expense?
? Would the fees be subject to GST?
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 an advance ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to provide the following comments, which may be of assistance to you.
As stated in Income Tax Technical News 13, dated May 7, 1998, employer-paid courses for the maintenance or upgrading of employer-related skills will generally not be considered a taxable benefit when it is reasonable to assume that the employee will resume his or her employment for a reasonable period of time after completion of the courses. The same is true for other business-related courses, even when they are not directly related to the employer's business.
The determination of whether or not a course is a taxable benefit to an employee must be made on a case-by-case basis. With respect to safe or defensive driving courses, factors to consider in determining if the course would be a taxable benefit include, but are not limited to the employee's employment duties and the content of the course. For example, a course preparing an individual to obtain a general driver's license for an employee whose employment duties do not involve driving a motor vehicle would likely be a taxable benefit. On the other hand, a defensive driving course to maintain or upgrade driving skills for an employee whose duties regularly involve a lot of driving likely will not be taxable.
In order for an expense to be deductible for a taxpayer, it must be incurred for the purpose of gaining or producing income. In our view, it is likely that the cost of a safe driving course for an employee meets this test and, therefore, would be deductible by the employer, whether or not it is a taxable benefit to the employee.
With respect to your questions on the GST, we have forwarded your letter to the Excise and GST/HST Rulings Directorate, which will respond to you directly.
The documents referred to above may be found on our web site at www.ccra.gc.ca.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
c.c. Chantal Desrosier, Manager,
Charities, Non-profit and Educational Services
Excise and GST/HST Rulings Directorate (CCRA)
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