19 December 1988 Income Tax Severed Letter 5-6701 - [Automobile Benefits at a Special Work Site]

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.

J.A. Szeszycki (613) 957-2130 DEC 19 1988

Dear Sirs:

Re: Automobile Benefits at a Special Work Site

We are responding to your letter of September 27, 1988 in which you requested confirmation of your understanding of the provisions of the Income Tax Act (the "Act") as they relate to the calculation of automobile benefits for an individual employed at a special work site.

The specific facts, as set out in your letter, surrounding the usage of the employer-provided vehicle are:

1) The employee's principal place of residence is located in XXXX to which he travels and where he resides on weekends.

2) The individual is employed at a special work site in XXXX where he resides in a temporary residence during the work week.

3) During the work week the automobile is used in travelling between his temporary residence and the special work site as well as in and around the work site in connection with his duties of employment.

4) On weekends he uses the automobile in travailing the distance between the temporary and permanent residences.

5) The employer pays for all gas and maintenance costs.

As you have indicated in your letter it is your understanding of paragraph 6(1)(e) of the Act that where an employer has made an automobile available to his employee, the employee must include in income the amount determined to be a reasonable standby charge. In addition, subsection 6(6) of the Act provides that, notwithstanding paragraph 6(l)(e) of the Act, under certain conditions the value of the benefit related to transportation between the principal residence and a special work site need not be included in income.

You have outlined two examples involving the calculation of automobile benefits for an individual employed at a special work site with the difference in the two examples being the extent of personal driving between the temporary residence and the special work site. You have asked that we confirm whether your application of paragraph 6(1)(e) and subsection 6(6) of the Act is correct.

First of all, we would like to confirm your basic understanding of the provisions. It should be clarified, however, that subsection 6(6) of the Act provides, in part, for the exclusion of that portion of the benefit that relates to transportation between the principal place of residence and the special work site. The benefit referred to is that which is determined under paragraph 6(1)(a) [operating cost benefit] and 6(1)(e) [standby charge] of the Act. This means that the automobile benefits under 6(1)(a) and (e) of the Act must first be calculated without reference to subsection 6(6) of the Act and then reduced accordingly.

Secondly, the recent amendments to Subsection 6(2) of the Act, which defines the "reasonable standby charge", now restricts the entitlement to a reduced standby charge to those employees whose use of the automobile, as measured in kilometres driven, in connection with the duties of his employment is at least 90%. In this regard, the wording of subsection 6(6) of the Act does not support your assumption that the kilometres driven between the principal residence and the specia1 work site would be considered as kilometres driven in connection with the duties of employment. Consequently, in each of the examples provided by you the distance travelled in connection with the duties of employment would be limited to 10,000 kilometres, well under the 90% of total kilometres needed to become entitled to a reduced standby charge.

The taxable benefit arising from the operating costs supported by the employer is calculated in the same way, i.e. the benefit under paragraph 6(1)(a) of the Act is first calculated based on total personal kilometres driven, which includes the total distance travelled between XXXX, and then reduced by the portion of total personal kilometres that relates to that segment of travel.

It is hoped the above comments will help to clarify the manner in which automobile benefits are to be calculated under the circumstances you described.

Yours truly,

ORIGINAL SIGNED BY

P.D. Fuoco for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch