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: Linespersons are on-call for five or six weeks per year and are required by the employer to take a company pick-up truck or a bucket truck home in order to respond to calls more expediently. The trucks are motor vehicles, not "automobiles" as defined under subsection 248(1) of the Act and are used to carry specialized equipment that are bulky in nature and used directly in the performance of the linespersons' employment duties, i.e., personal protection clothing, gear and equipment such as harnesses/cable-locating equipment etc.
1) Will a taxable benefit arise in the circumstances described?
2) What is an appropriate method to calculate the employment benefit for the personal use of the motor vehicles?
Position: 1)Yes. 2) The rate prescribed in s. 7305.1 of the Regulations.
Reasons: The rate in section 7305.1 of the Regulations reflects the economic benefit enjoyed by taxpayers that are prohibited from the personal use (other than driving between home and work) of motor vehicles that are specifically suited or designed to the employers' business or trade and are essential in a fundamental way for the performance of the employment duties. While this rate does not reflect the capital cost of owning a motor vehicle, it generally does reflect the operating cost. The rate, therefore, better reflects the benefit as a result of saving expenses that he or she would have otherwise had to incur for travel to and from work.t
2008-027274
XXXXXXXXXX Rob Ferrari
(613) 957-2138
April 10, 2008
Dear XXXXXXXXXX :
Re: Taxable Benefit - Employer Provided Motor Vehicle (Not Automobile)
This is in reply to your letter dated March 14, 2008 and our telephone conversations on April 3, 2008, concerning the above noted subject matter.
You described a situation where linespersons are on-call for five or six weeks per year and are required by the employer to take a company pick-up truck or a bucket truck home in order to respond to calls more expediently. The trucks are motor vehicles, not "automobiles" as defined under subsection 248(1) of the Income Tax Act (the "Act"). The motor vehicles are used to carry specialized equipment that is bulky in nature and used directly in the performance of the linespersons' employment duties. (Personal protection clothing, gear and equipment such as harnesses, cable-locating equipment etc.) You have asked for our opinion as to whether a taxable benefit arises under these circumstances and if so, what is an appropriate method to calculate the employment benefit for the personal use of the motor vehicles described above.
Our Comments:
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 income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to offer the following comments.
Your letter states the linespersons are driving motor vehicles that do not fall within the definition of "automobiles" under the Act and therefore our comments are limited in application to motor vehicles that are not automobiles. For further information as to whether a vehicle falls within the defintion of an automobile under the Act and the calcuation of employment benefits arising as a result of employer provided automobiles, please refer to the Canada Revenue Agency's ("CRA") publication T4130(E) Rev. 07, Employers' Guide Taxable Benefits, which may be found on the CRA website at http://www.cra-arc.gc.ca/E/pub/tg/t4130/t4130-e.html#P211_11601.
When an employer makes a motor vehicle available for an employee's personal use, it generally gives rise to a taxable employment benefit. The use of an employer-provided motor vehicle by an employee to travel between his or her home and a regular place of employment is considered personal notwithstanding that the vehicle may be required because the employee is on call for emergency purposes. However, where the employee proceeds directly from home to a point of call other than the employer's place of business to which the employee regularly reports or returns home from such a point, the use of the vehicle is considered employment-related.
An employee may benefit from the personal use of an employer-provided motor vehicle and the benefit for such use is included in the employee's income under paragraph 6(1)(a) of the Act. The amount of the benefit is based on a reasonable calculation of the value of the benefit derived by the employee from the personal use.
As noted in paragraph 23 of 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 a motor vehicle other than an automobile is essential to the employer's business operation, and its only personal use is to provide transportation between an employee's residence and the employer's business premises, it may be appropriate to calculate the benefit to the employee on a cents-per-kilometre basis for equivalent automobile transportation." The CRA generally accepts the rates prescribed in section 7306 of the Income Tax Regulations (the "Regulations") for this purpose. This rate reflects the cost of owning and operating an automobile and is a reasonable approximation of the benefit enjoyed by an employee for the personal use of an employer-provided motor vehicle that is not an automobile. For 2008, in most areas of Canada, the rate is 52 cents per-kilometre for the first 5,000 kilometres driven and 46 cents for each additional kilometre.
However, there may also be situations where the rate prescribed in section 7306 of the Regulations does not reflect the economic benefit enjoyed by the employee for the personal use of the employer's motor vehicle and, therefore, a lower rate is more appropriate. For this purpose, the CRA will accept a benefit that is calculated using the rate prescribed in section 7305.1 of the Regulations, which is 24 cents-per kilometre for 2008, where all of the following conditions have been met:
1) the employer prohibits any other personal use of the motor vehicle (other than commuting between home and work),
2) the employer has bona fide business reasons for requiring the employee to take the vehicle home at night, such as:
a) there are reasonable security concerns with respect to the employer's tools and equipment being left at the worksite or overnight at employer's premises, or
b) the employee is on-call to respond to public emergencies and the vehicle is provided to improve response to emergencies.
3) The motor vehicle is specifically suited to or designed for the employer's business or trade and is essential in a fundamental way for the performance of the employment duties. For example:
a) the motor vehicle is specially designed or equipped to carry tools or equipment for the business or trade,
b) the motor vehicle is consistently used to carry and store heavy, bulky or numerous tools and equipment necessary for the performance of employment duties. These items would be of a nature that could not easily be loaded and unloaded from the vehicle,
c) the motor vehicle is used on a regular basis to carry material that is noxious and malodorous, such as veterinary samples or fish and game, or
d) where the employee's circumstances are that of being on-call for public emergencies as described in 2(b) above, the vehicle is clearly marked or specially equipped so as to provide for rapid response or for the purposes of carrying specialized equipment to the scene of the emergency.
In our opinion, the rate in section 7305.1 of the Regulations may be used to calculate the benefit for the five to six weeks of the year that the linespersons described in your letter are on call for emergencies and required to take a company bucket truck or pick-up truck home. We would also like to note that when calculating the benefit, the use of these trucks is not considered personal if the linesperson proceeds directly from home to the emergency or returns home from that point of call.
We trust these comments are helpful.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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