15 September 2004 External T.I. 2004-0083991E5 - Employment benefits-automobiles

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: 1) Deductibility of advertising place on company vehicle. 2) Whether standby charge is reduced because there is company advertising.

Position: 1) Should be capitalized unless of a recurring nature. 1) No, only exception is for clearly-marked emergency response vehicles.

Reasons: 1) Not of a current nature, part of cost of car. 2) No legislative expection in definition of automobile.

XXXXXXXXXX 2004-008399

September 15, 2004

Dear XXXXXXXXXX:

Taxable benefits-vehicles

This is in response to your correspondence of July 5, 2004, concerning the above-noted subject.

You indicated that the employer is a XXXXXXXXXX company with a fleet of 12 vehicles. The technicians are using some of the company vehicles to drive between the office and their homes. The technicians have been paying a taxable benefit on the lease and operating cost.

Your question

It has come to your attention that, if the vehicles were to have company advertising on 3 sides, then the expense can be considered an advertising expense and therefore, not a taxable benefit. You asked us to comment on this.

Our comments

In general terms, the cost of placing advertising on the company vehicles would form part of the capital cost of the vehicle and hence would not be currently deductible as an advertising expense (since it is not of a recurring nature).

As noted in paragraph 5 of Interpretation Bulletin IT-63R5, travel between an employee's place of work and home, even if the employee may have to return to work after regular duty hours, is considered personal. In our opinion, there is no provision that would otherwise reduce the taxable benefit under paragraph 6(1)(e) or (k) because the employer has placed the corporate logo or some other form of advertising on the automobile that is used by an employee to travel back and forth to work.

For further information on the calculation of automobile benefits, please refer to chapter 1 - Automobile Benefits and Allowances of the CRA'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.

We hope that these comments are helpful.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate