10 September 1990 External T.I. 900935 F - Company-provided 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.

September 10, 1990

Dear Sirs:

Re:  Company-Provided Automobiles

This is in reply to your letter of May 11, 1990, wherein you requested the Department's opinion concerning the business use of company-provided vehicles in the situations described below. 

Employer Co. is a Canadian corporation which provides automobiles to certain of its employees.  In accordance with the provisions of paragraph 6(1)(e) and subsections 6(2) and 6(2.2) of the Income Tax Act, Employer Co. includes in the employment income of each of these employees a reasonable standby charge. 

Employer Co.'s corporate policy requires that most employees with company-provided automobiles are also provided with mobile cellular telephones which have been installed in the company-provided automobiles.  All employees of Employer Co. whose company-provided automobiles are equipped with cellular phones are required to be on standby for employment related matters whenever they are in their vehicles.  In this regard, they are in regular contact with their office and customers while in their automobiles.

In your letter, you noted the Department's position, as expressed in paragraph 5 of Interpretation Bulletin IT-63R3, that driving between an employee's home and the employer's place of business is a personal use of an automobile, except in circumstances where the employer requires or gives permission to the employee to go directly from home to a destination other than the employer's place of business.  It is your view that, in line with the above position, an employee who is contacted during the course of driving home to office and diverted to another point of call could consider that particular trip not to be of a personal nature for the purposes of the calculation of the standby charge.

You requested our opinion as to whether this view could be extended to apply to any trip where an employee uses a cellular telephone to perform his employment duties and, if so, whether it could be further extended to apply to every trip between home and the employer's place of business on the grounds that the employee is required to be prepared to perform the duties of employment during the course of the trip.

Our Comments

As you noted, it is the Department's position that driving between an employee's home and the employer's place of business is considered to be a personal use of the automobile.  We do not agree that this position is altered by the fact that an employee performs an employment activity during the course of that drive, whether by use of a cellular telephone or otherwise.

Where an employee begins a drive between home and the employer's place of business and, during the course of that drive, is contacted by telephone and diverted to another place to perform an employment activity, it is our view that the portion of the drive from the point of diversion would be considered employment related and the portion of the drive up to that point would be considered to be personal in nature.

Employees should maintain records with respect to the use of a vehicle so that a correct apportionment between personal and employment related kilometres can be made.

We trust that our comments will clarify the Department's position in this matter.

Yours truly,

for Director Business and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch