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: Are certain employees in receipt of an employment benefit relating to the personal use of an employer-supplied automobile?
Position: Question of fact. However, if the vehicles meet the definition of "automobile" in subsection 248(1) of the Act, the standby charge/operating cost benefit will apply. If the vehicles do not meet the definition of "automobile" there is a paragraph 6(1)(a) benefit for personal use.
Reasons: It must be determined whether the pick-up trucks in question fit the definition of "automobile". Further, it would have to be determined whether the employees make personal use of the vehicles. These determinations are not possible based on the information provided.
2005-012700
XXXXXXXXXX Renée Shields
(613) 948-5273
October 19, 2005
Dear XXXXXXXXXX:
Re: Employment benefit - automobile
This is in response to your electronic correspondence of April 25, 2005 inquiring about employment benefits arising from the use of an employer-supplied automobile.
You have indicated that the employer in this situation is a construction company, which performs most of its work at restricted job sites either at airports or at pulp mills/refineries. In both situations, the company vehicles, most of which are extended cabs, and the superintendent drivers themselves, must have security clearances. Because the job sites are usually closer to the homes of the superintendent employees, the individuals take the trucks home and drive directly to the job site. Only vehicles with clearance may operate at the airport, which means that these trucks are used to "transport personnel". Your correspondence also indicates that some trucks are also used as offices, since no portable offices can be placed "airside".
The situation outlined in your letter appears to relate to a factual one, involving a specific taxpayer. It is this Directorate's practice to comment on proposed transactions involving specific taxpayers by way of an advance income tax ruling. For more information about how to obtain a ruling, please refer to Information Circular 70-6R5, "Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other CRA publications can be accessed on the internet at http://www.cra-arc.gc.ca. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office ("TSO") for their views. A list of TSOs is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.
The CRA's general views regarding automobile benefits are contained 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". Where an employer's automobile is available for the personal use of an employee, the employee is considered to have received a taxable employment benefit. Generally, the value of an automobile benefit is comprised of an "automobile operating expense benefit" as well as a "reasonable stand-by charge". It should be noted that a reduced benefit calculation is available in certain situations, as described in paragraph 8 of IT-63R5. Additional discussion and assistance in calculating an automobile benefit is available in T4130, "Employers' Guide - Taxable Benefits".
The preliminary question to be determined is whether the vehicles in question qualify as an "automobile" as defined in subsection 248(1) of the Income Tax Act. Of potential relevance to your inquiry are the following exceptions to the definition of automobile:
? A van or pick-up truck that only has seating for the driver and two passengers, which is used primarily for the transportation of goods or equipment in the course of gaining or producing income. The transportation of goods and equipment can include the transportation of tools to or from a job site. You should be aware that the CRA has a published position that extended cab trucks do not fit this exception, even in situations in which the back seats have been removed.
? A van or pick-up truck that is used all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income. The CRA interprets this to mean that at least 90% of the use of the truck must be for these purposes. It would be a question of fact, based on a review of each of the vehicles in question, whether they fit within this exception.
If it is determined that a vehicle fits within the definition of "automobile", it must also be established that the vehicle is available for the employee's personal use. Personal use includes such things as using the vehicle for vacation or personal shopping excursions. It also includes driving between home and the regular place of work.
As paragraph 5 of IT-63R5 points out, there is an exception to the above rule. If an employer requires an employee to go 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 point, this is not considered personal use.
Whether or not a work site can be considered 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.
The CRA has expressed the view that regardless of the use, or the non-use, of the automobile, once it has been made available to the employee, that individual is still subject to the calculation of the standby charge for each day the vehicle is made available to him or her. An automobile is available for use by an employee as long as the employee has access to, or control over, the vehicle. Access is considered to end when an employee returns the keys of the automobile to the employer. However, where personal use is restricted to the drive to and from work, there is an increased likelihood that the minimal mileage will entitle the employee to calculate the benefit using a reduced stand-by charge.
Finally, although the foregoing stand-by charge/operating cost calculations will not apply if the vehicle in question does not meet the definition of "automobile", personal use of an employer's vehicle will result in an employment benefit under paragraph 6(1)(a) of the Act. Such a benefit would be based on a reasonable estimate of the fair market value of the benefit, including GST.
We trust that these comments will be of assistance.
Yours truly,
John Oulton, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Policy and Planning Branch
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