7 February 1991 External T.I. 902305 F - Automobile Benefit Provisions

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.

Dear Sirs:

Re:  Automobile Benefit Provisions

We are responding to your letter of August 24, 1990 and further to subsequent telephone conversations   19(1)  Szeszycki) wherein you requested that we consider a different method of calculating the standby charge under the circumstances you described.  We apologize for the delay in sending you a written response.

The situation upon which your request was made included the following facts:

24(1)

In your analysis you have noted that there is a discussion in Interpretation Bulletin IT-63R3 with respect to pooling arrangements but that, in your view, the positions set out in paragraph 21 are at odds with a strictly technical reading of subsection 6(2) of the Act.   You cite three examples where the application of the provision to the pooling situation is either incorrect or inequitable.

In your first example you make reference to the wording of element A(d) of the formula which appears to require that in determining whether the full standby charge is assessable the key question is whether all or substantially all of the distance driven by the automobile is employment-related.  When applied technically to a pooling situation as described above the result is that since more than ten percent of the distance travelled by the automobiles has been for personal reasons any employee that has access to the pool of automobiles will be charged with a standby charge for the total number of days that an automobile from that pool is made available to him by the employer.  This would include any employee who uses the car only for business purposes.

Paragraphs 20 to 22 of the bulletin discuss the calculation of the operating cost benefit under paragraph 6(1)(a) of the Act and the determination of the standby charge benefit in the pooling situation.  The main principle behind the position taken in the bulletin is that, instead of attempting to associate each individual employee with each specific car driven for each day, an averaging method is used.  For example, the total operating costs are spread over the entire fleet of vehicles and an average cost is assessed as a benefit under paragraph 6(1)(a) of the Act.  Paragraph 21 describes the application of this principle to the calculation of the standby charge.  An average purchase or lease cost is inserted into the subsection 6(2) formula.  Although not specifically mentioned in that paragraph, having created an "average automobile" the distance driven by it would be apportioned between employment-related and personal use.

We agree that, technically, using the facts set out in your letter, and assuming that the average personal kilometres driven by the "average automobile" exceeds ten percent of the total distance driven by the automobile, each employee to whom an automobile from the fleet is made available would be assessed a standby charge.  In your conclusion you have asked us to consider whether the rules set out in paragraph 13 of the bulletin could alternatively be used.  Paragraph 13 discusses the assessment of a benefit with respect to the personal use of a vehicle  (other than an automobile) that is made available by the employer.  It includes the suggestion that in some circumstances a cents-per-kilometre formula may be appropriate.  It is our view, however, that since there is a specific provision which deals with the standby charge benefit with respect to automobiles an alternative computation cannot be technically supported.   We have referred the matter, however, to the Taxation Programs Branch whose responsibility includes consideration of questions involving administrative policy.  They will be responding to you shortly.

Your second example involved the calculation of the number of days that a vehicle is made available to an employee.  It is your view that an argument could be made that, since more than one employee uses a particular automobile on a given day, no one employee has the car made available to him for the "day".  Such an argument presupposes that the automobile must be available to the employee throughout the 24-hour day.  It is the Department's view, however, that if an employee has an automobile made available to him by the employer for any part of a given day, regardless of whether the car is used by the employee throughout the day for one hour, or even if it is parked in the employee's driveway and not used at all, that day becomes an "available day" for the purposes of paragraph 6(1)(e) and subsection 6(2) of the Act

In your third example you discuss the wording of element B of subsection 6(2) of the formula.  It is your view that if a particular automobile in the fleet is used by the employee for fewer than 15 available days the rounding feature found in element B of the formula would cause the number of thirty-day periods, and thereby the standby charge itself, to be reduced to zero.  We must advise, however, that the rounding feature in the formula is applicable only when the quotient obtained when the total available days divided by 30 exceeds one.  Thus, in the situation you describe, a standby charge would still result.

We hope our comments clarify the Department's position on these questions.

Yours truly,

for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c.     A. Bissonnette Source Deduction Division