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:
Auto benefits taxability for "on call" employees
Position:
Yes
Reasons:
Drive to and from work is personal
971233
XXXXXXXXXX C. Tremblay
957-2744
Attention: XXXXXXXXXX
September 25, 1997
Dear Sirs:
Re: Application of Paragraph 6(1)(a),(e), and (k) of the Income Tax Act (the "Act")
This is in reply to your letter of April 28, 1997, wherein you requested a technical interpretation on the application of paragraphs 6(1)(a),(e) and (k) of the Act as they relate to employees who are provided with vehicles by their employers for business purposes in the situations you describe.
The situations that are described appear to involve a series of actual completed and ongoing transactions involving specific taxpayers; consequently, your questions should be directed to your District Services Taxation Office which has the responsibility of determining the tax consequences of completed transactions and their implications to the specific taxpayers. Although we are unable to provide any opinion in respect of the specific transactions described in your letter, we have set out some general comments which may be of some assistance.
The value of the benefit derived by an employee from the personal use and availability of an automobile supplied by an employer is required to be included in calculating the employee's income. This value is an amount equal to a prescribed amount per kilometre for operating costs in connection with personal use and a "reasonable standby charge" (plus the equivalent to the Goods and Services Tax (GST) on the standby charge). In general, this standby charge is 2% per month of the cost of the automobile, or 2/3 of the lease costs calculated with reference to the number of days the automobile was available to the employee or to a person related to the employee. However, this standby charge may be reduced when the personal use is less than 1,000 kilometres a month and the business-use portion of the total kilometres travelled is 90% or more. Further, provided the automobile is used primarily for business purposes, an amount equal to one-half of the standby charge benefit may be used as the amount of the operating costs benefit in lieu of the 14¢ per kilometre calculation.
An "automobile" is defined in subsection 248(1) of the Act as a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and eight passengers.
It is our view that an employee's requirements to be "on call" and have an automobile available at all times does not diminish the benefit received by the employee in being able to travel between home and the work place in an employer-provided vehicle. Regardless of the use or the non-use of the automobile, once it has been made available to the employee, the individual is still subject to the standby charge for each day the vehicle is made available to the employee. Accordingly, in our view, an automobile is available for use by an employee as long as he has access to, or control over, the vehicle. Access ends when an employee returns the keys of the automobile to the employer.
It is the Department's view that if an employer-owned automobile is made available to an employee for any part of a day, with the mutual understanding that the employee may use the automobile for personal use (regardless of whether or not the automobile is used for personal use), that day becomes an available day for the purposes of paragraph 6(1)(e) and subsection 6(2) of the Act.
However, in cases where the personal usage is restricted to the drive to and from work there is an increased likelihood that the total personal kilometrage will be sufficiently low as to entitle the employee to a reduced standby charge.
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)of the Act) and the operating expense benefit (paragraph 6(1)(k) of the Act), 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 23 of interpretation bulletin IT-63R5 deals with the benefits resulting from the personal use of employer-provided motor vehicles that are not automobiles. The Department takes the position which is supported by the Courts that travel between an employee's residence and his or her regular place of work is personal. An individual's regular place of work is considered to be the place where the individual reports for work. Once the amount of the benefit is computed, it 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 trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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