10 February 1995 External T.I. 9432045 - AUTOMOBILE STANDBY CHARGE

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Do the standby charge and new operating cost benefit provisions apply to the proposed employer-provided vehicle plan of the particular employer.

Position TAKEN:

From the specific information provided...no!

Reasons FOR POSITION TAKEN:

The vehicles as described are exclusions from the definition of "automobile" in subsection 248(1)

		943204
XXXXXXXXXX	J.A. Szeszycki

Attention: XXXXXXXXXX

February 10, 1995

Dear Sirs:

Re: Automobile Standby Charge - Employer-Provided Vehicle

This is in reply to your letter of November 23, 1994, and further to our subsequent telephone conversation (Szeszycki/XXXXXXXXXX), in which you requested a "ruling" as to whether, in the circumstances described, the employees of XXXXXXXXXX would be subject to the standby charge benefit related to the use of vehicles provided to them.

As explained in our telephone conversation, your enquiry appears to seek clarification as to the application of the employment benefit rules as they relate to automobiles and other vehicles, rather than a request for an advance tax ruling, as described in the Department's information circular on the subject, IC 70-6R2. Our response is therefore being provided on an opinion basis.

XXXXXXXXXX

At the present time, the representatives use their own vehicles and are being reimbursed for business use at a reasonable per kilometre rate. XXXXXXXXXX is now contemplating providing its representatives with company vehicles and must deal with the issue of personal use of these vehicles.

You indicate in your letter that the vehicles that will be provided would not be classified as "automobiles" as that term is defined in subsection 248(1) of the Income Tax Act (the Act), to which you referred. You indicate that the vehicle would not be able to transport more than the driver and two passengers and would be used primarily for the transportation of goods and equipment in the course of doing business. On this point we would only emphasize that the criteria just mentioned, for excluding the vehicle from the definition of an automobile, relate to motor vehicles that are vans or pick-up trucks.

If the vehicles being provided are, in fact, motor vehicles other than automobiles, then the provisions of the Act that are specific to employer-provided automobiles, i.e., the standby charge (paragraph 6(1)(e)) and the operating expense benefit (paragraph 6(1)(k)), would not be applicable. The employee benefit in respect of the personal use of such motor vehicles would be included in income under the general provision of paragraph 6(1)(a) of the Act. Paragraph 13 of interpretation bulletin IT-63R4, which deals with the benefits resulting from the personal use of employer-provided motor vehicles that are not automobiles, describes the alternative ways of computing the benefit. We have enclosed a copy of the bulletin for your convenience. Once computed, the amount of the benefit may then be reduced by any amounts reimbursed by the employee to XXXXXXXXXX in respect of the personal use of the vehicle. Any remaining benefit must be included on the employee's T4 information slip for the year.

Finally, you referred in your letter to the notice received from XXXXXXXXXX which provided information concerning the recently enacted amendment to the automobile benefit rules. The amendment introduced the 12-cent per kilometre operating expense benefit that applies to employer-provided automobiles. This new provision does not apply to motor vehicles that are not automobiles, as defined in subsection 248(1) of the Act.

We hope our comments and the bulletin will help to clarify the computation of benefits under the circumstances you described. Your deposit of $481.50 will be returned to you under separate cover.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Rulings Directorate
Policy and Legislation Branch