14 March 2005 External T.I. 2005-0119451E5 - MV Benefits-Employer's Record Keeping Require.

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 an employer is obligated under the Act to ensure that an employee maintains a logbook in respect of the personal use of an employer-provided motor vehicle?

Position: Yes.

Reasons: An employer is obligated under the Act to determine an employee's total employment income, including benefits derived from the personal use and availability of an employer-provided motor vehicle, and to make appropriate withholdings on the amount pursuant to subsection 153(1) of the Act. Subsection 230(1) of the Act requires the employer to maintain adequate records so that the employee's total employment income can, if necessary, be verified - "every person who is required, by or pursuant to [the] Act, to pay or collect taxes or other amounts shall keep records and books of account ... in such form and containing such information as will enable ... the taxes or other amounts that should have been deducted, withheld or collected to be determined." The Courts have consistently held that the best evidence to determine the amount of personal use of an employer-provided motor vehicle is a logbook.

Randy Hewlett
XXXXXXXXXX 613-941-7239
2005-011945
March 14, 2005

Dear XXXXXXXXXX:

Re: Motor Vehicle Benefits - Employer's Record Keeping Obligations

We are writing in response to your e-mail of March 7, 2005, wherein you asked for our opinion on whether an employer is obligated under the Income Tax Act (the Act") to ensure that an employee maintains a logbook in respect of the personal use of an employer-provided motor vehicle.

Our Comments

An employer is obligated under the Act to determine an employee's total employment income, including benefits derived from the personal use and availability of an employer-provided motor vehicle, and to make appropriate withholdings on the amount pursuant to subsection 153(1) of the Act. An employer could be subject to interest and penalties for the failure to make sufficient withholdings on an employee's total employment income. In our view, subsection 230(1) of the Act requires the employer to maintain adequate records so that the employee's total employment income can, if necessary, be verified. Subsection 230(1) of the Act, in part, states: "every person who is required, by or pursuant to [the] Act, to pay or collect taxes or other amounts shall keep records and books of account ... in such form and containing such information as will enable ... the taxes or other amounts that should have been deducted, withheld or collected to be determined."

The Courts have consistently held that the best evidence to determine the amount of personal use of an employer-provided motor vehicle is a logbook (see, for example, Bahl v The Queen, FCTD 1993 DTC 5074). Given the repercussions for failing to make sufficient withholdings, we see no reason why the employer would not make every reasonable effort to ensure that an employee maintains a logbook in respect of the use of its motor vehicle.

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 Planning Branch