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.
Principal Issues: Whether travel between home and a work site gives rise to a taxable benefit.
Position: Question of fact.
Reasons: Where travel between home and a work site is considered personal use of an automobile, employee in receipt of a taxable benefit.
A. Seidel
XXXXXXXXXX (613) 957-2058
2004-008189
September 30, 2004
Dear XXXXXXXXXX:
Re: Taxable Benefits
This is in reply to your May 20, 2004 letter that was sent to us by facsimile. You have requested our comments regarding the calculation of employee benefits related to the personal use of a company-owned pick-up truck.
You indicate that your company provides a company-owned pick-up truck to its construction supervisors (the "Employees"). The Employees manage various construction projects and are required to travel to various job sites to fulfill their duties of employment.
The particular circumstances in your letter on which you have asked for our views appear to be a factual situation involving a specific taxpayer. To the extent that you require confirmation of the tax consequences of proposed transactions, we bring to your attention Information Circular 70-6R5, Advance Income Tax Rulings. To the extent that you require confirmation of the tax consequences of completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. With respect to the scenarios described in your letter, we offer the following general comments which may be of assistance.
The taxation of employee benefits for the personal use of an employer provided "motor vehicle" is described in 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 ("IT-63R5"). The value of the benefit derived by an employee from the personal use and availability of a motor vehicle supplied by an employer is required to be included in calculating an employee's income from employment.
The amount of a motor vehicle benefit to be included in an employee's income depends, in part, on whether the vehicle in question is an "automobile" within the meaning thereof in subsection 248(1) of the Income Tax Act (the "Act"). The definition of "automobile" in subsection 248(1) of the Act excludes certain vans, pick-up trucks or similar vehicles used in transporting goods, equipment or passengers in the course of gaining or producing income. For example, subparagraph (e)(i) excludes a van or pick-up truck that "has a seating capacity for not more than the driver and two passengers and that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods or equipment in the course of gaining or producing income". Subparagraph (e)(ii) excludes such a van or pick-up truck "the use of which, in the taxation year in which it is acquired or leased, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income". Subparagraph (e)(iii) excludes a motor vehicle of a type commonly called a pick-up truck that is used in the taxation year in which it is acquired or leased primarily for the transportation of goods, equipment or passengers in the course of earning or producing income at one or more locations in Canada that are, in respect of any of the occupants of the vehicle, a special work site pursuant to subparagraph 6(6)(a)(i) of the Act or a remote work location pursuant to subparagraph 6(6)(a)(ii) of the Act. The subparagraph (e)(iii) exception only applies where the taxpayer was required by the taxpayer's duties to be away from the taxpayer's principal place of residence, or to be at the special work site or location, for at least 36 hours.
Employee benefits for the use of an automobile are included in income under paragraph 6(1)(e) of the Act as standby charges and the amount of the benefit is determined by factors such as whether the vehicle is available for the employee's use, and the personal versus business use of the vehicle. Employee benefits for the use of motor vehicles other than automobiles are included in income under paragraph 6(1)(a) of the Act. The value of a motor vehicle benefit under paragraph 6(1)(a) of the Act is based on a reasonable calculation of the benefit derived by the employee, which again depends upon such factors as personal use of the vehicle.
For further information on the calculation of automobile benefits, please refer to chapter 1 - Automobile Benefits and Allowances of the Canada Revenue Agency's guide T4130, entitled Employers Guide Taxable Benefits 2003-04. This guide can be found on our website at: http://www.cra-arc.gc.ca/E/pub/tg/t4130/t4130-e.html.
In general, personal use of a motor vehicle includes travel between the employee's place of work and home, even though the employee may have to return to work after regular duty hours. An exception occurs, however, 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, or returns home from such a point. These particular trips are not considered to be of a personal nature. This is explained in paragraph 5 of IT-63R5.
You have requested clarification as to whether a taxable benefit arises in the following specific situations.
A. The Employee travels directly from home to the company's head office at the beginning of the day and travels back home from the company's head office at the end of the day.
B. The Employee travels directly from home to a work site at the beginning of the day, travels to the company's head office after completing the duties required at the work site and then travels home from the company's head office at the end of the day.
C. The Employee travels from home to the company's head office at the beginning of the day, travels from the company's head office to a work site and then travels directly home from the work site at the end of the day.
D. The Employee travels from home to a work site at the beginning of the day, spends the entire day at the work site and travels back home from the work site at the end of the day.
In all of the situations described in your letter, the subparagraph (e)(iii) exception to the definition of "automobile" in subsection 248(1) of the Act, related to special work sites and remote work locations, does not apply because the employees return home on a daily basis.
In all of the above scenarios, the Employee's travel between home and the company's head office, or between home and a work site that is a regular work location of the employer, is considered personal use of the pick-up truck and the Employee will be in receipt of a taxable employment benefit. The amount of the benefit will be determined pursuant to paragraph 6(1)(a) or paragraph 6(1)(e) of the Act, as discussed above.
Whether or not a work site is a place of business of the company to which the Employee regularly reports can only be determined after reviewing all of the relevant facts, including the frequency to which a particular location is visited and the degree of travelling required by the Employee, regardless of the destination.
Where it is determined that a work site is not an employer's regular place of business, the Employee's travel from home to the work site, and from the work site to home, would fall within the exception described in paragraph 5 of IT-63R5. Accordingly, such travel is not considered to be personal use of the pick-up truck.
In scenarios B and C, the Employee's travel includes trips from a company work site to the company's head office or from the company's head office to a company work site. Such travel by an Employee is not considered to be personal use of the company's pick-up truck.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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