14 July 1995 External T.I. 9507975 - DEFINITION OF AUTOMOBILE

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:

Is the motor vehicle known as a Hummer an automobile purusant to the definition contained in subsection 248(1) of the Act. If so, would it be excluded by virtue of the provisions in subparagraphs e(i) or e(ii) of the definition.

Position TAKEN:

The vehicle as described provided it meets the use requirment will be excluded from the definition of an automobile.

Reasons FOR POSITION TAKEN:

Review of vehicle standards and functions and comparision with van and pickup truck indicates it may be considered an "similar vehicle" for purposes of the exclusion provisions.

		 950797
XXXXXXXXXX	 D. Zion

Attention: XXXXXXXXXX

July 14, 1995

Dear Sirs:

Re: Definition of an Automobile

We are writing in response to your letter of March 16, 1995 in which you ask whether or not a vehicle known as a Hummer is an automobile pursuant to the definition contained in subsection 248(1) of the Income Tax Act (the "Act). In addition, should it be determined to be an automobile, you have enquired whether or not it would be excluded from the definition by virtue of the provisions contained in subparagraphs (e)(i) or (e)(ii) of that subsection. We regret the delay in replying.

The Hummer is an all terrain motor vehicle originally designed for transportation and cargo use by the United States Armed Forces. Basically, it is a 4-wheel drive vehicle with fully independent suspension, heavy duty hydraulic shocks and 16 inches of ground clearance. It is now available to the civilian market with certain refinements to the original design. It will be used by a client to visit construction sites, transport current and prospective customers to construction sites, tow trailers and deliver construction materials to the different construction sites. The particular model in question will have the capacity to carry 6 to 8 passengers with 2 removable seats.

Our Comments

Whether a particular motor vehicle is an automobile, as that term is defined in subsection 248(1) of the Act is a question of fact. You will note from the wording used in that subsection to define the term that, with respect to vehicles that are vans, pick-up trucks or similar vehicles, a particular vehicle's correct classification as either an automobile or other motor vehicle depends on its seating capacity and the manner in which it is used.

The opening wording of the definition of an automobile contained in subsection 248(1) of the Act refers to a "motor vehicle that is designed or adapted primarily to carry individuals on highways or streets and that has a seating capacity for not more than the driver and eight passengers". In our view, this would include a Hummer. In relation to this wording however, paragraph (e) of the definition excludes, if specified requirements are met, certain motor vehicles i.e., a "van or pick-up truck or similar vehicle". We have determined from our review of the information provided and comparison to van and pick-up truck specifications and function that the Hummer can be regarded as a similar vehicle for the purposes of the preamble to subparagraphs (e)(i) and (e)(ii) of the definition of an automobile. Subparagraph (e)(i) provides that a van, pick-up truck or similar vehicle will not be included in the definition of an automobile provided it has a seating capacity for a maximum of three persons and the use requirement therein is satisfied. In our view, this provision would not be applicable to the Hummer since the models described in the documentation forwarded with your enquiry indicated that the hummer has a seating capacity for a minimum of 4 passengers and furthermore, the particular Hummer in question will have a capacity to carry 6 to 8 passengers.

It is our opinion however, that, provided that the Hummer is used all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income, it will meet the provisions of the exclusion in subparagraph (e)(ii) of the definition of an automobile in subsection 248(1) of the Act and would accordingly not be considered to be an automobile for the purposes of the Act. For the purposes of the Act, "all or substantially all" is considered to be more than 90% of the time. In the determination of whether or not the motor vehicle is used "all or substantially all" in the course of gaining or producing income, personal driving such as travel between the employee's home and work place would not be considered to be use in the course of gaining or producing income.

If the Hummer is a motor vehicle other than an automobile by virtue of the exclusion in subparagraph (e)(ii) of the definition of an automobile in subsection 248(1) of the Act, 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 5 of Interpretation Bulletin IT-63R4, provides comments regarding the personal use of an employer-provided motor vehicle. Generally, personal use of a motor vehicle provided by an employer includes driving between the employer's place of business and the employee's residence 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. Paragraph 13 of the same bulletin, 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. Once computed, the amount of the benefit may then be reduced by any amounts reimbursed by the employee to the employer 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.

We would caution that these comments reflect an expression of opinion only and as indicated in paragraph 21 of Information Circular 70-6R2 are not binding on the Department.

Yours truly,

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