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.
Principal Issues: Whether a standby charge for an employee can be reduced by the number of days for which the employee chooses to surrender both the automobile and the keys to the employer, such as for example, annual vacation, weekends or holidays?
Position: No.
Reasons: An employee is subject to the calculation of the standby charge for each day the vehicle is made available to him or her. An automobile ceases to be available for an employee for purposes of the standby charge calculation only when the employee is required by the employer to return the automobile and surrender its keys. This would not apply in a situation where an automobile is used substantially for personal use and an employee voluntarily surrenders the automobile and keys during a period of absence from work for purposes of reducing the standby charge.
XXXXXXXXXX
2011-040922
I. Landry, M.Fisc.
July 12, 2011
Dear XXXXXXXXXX :
Re: Automobile Standby charge
I am writing in reply to your letter of June 1st, 2011, requesting our opinion on the calculation of the standby charge pursuant to subsection 6(2) of the Income Tax Act (the "Act"). More specifically, you have enquired whether the standby charge for an employee can be reduced by the number of days for which the employee chooses to surrender both the automobile and the keys to the employer, such as for example annual vacation, weekends or holidays. We understand that the vehicle in the present situation is a qualifying "automobile", as defined in subsection 248(1) of the Act.
Unless otherwise stated, all statutory references in this letter are references to the provisions of the Act.
Written confirmation of the tax implications inherent in a particular transaction is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. The particular situation outlined in your letter relates to a factual one, involving a specific taxpayer, therefore, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to offer the following general comments that may be of assistance.
Where an employer's automobile is available for the personal use of an employee, the employee is considered to have received a taxable employment benefit. Subparagraph 6(1)(e)(i) states that a reasonable standby charge benefit should be determined where an employer makes an automobile available to an employee. For purposes of paragraph 6(1)(e), a reasonable standby charge is calculated pursuant to the formula in subsection 6(2) and is based in part on the total number of days in a taxation year during which an automobile is made available to an employee.
The Canada Revenue Agency's views on this issue are discussed in more detail in Interpretation Bulletin IT 63-R5, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992, which is available on our website at http://www.cra-arc.gc.ca/F/pub/tp/it63r5/it63r5-f.html. As noted in paragraph 11 of IT-63R5, the expression "total available days" includes the first day during which an automobile is made available to an employee, or to a person related to the employee, and each day thereafter until such time as the employee is required by the employer to return the automobile and the control over its use to the employer or a person related to the employer.
Consequently, we are of the view that an automobile ceases to be available to an employee only when the employee is required by the employer to return both the automobile and its keys. As a result, those days should not be counted in the total available days for purposes of the standby charge calculation. This would generally be the case in a situation where the employer owns a fleet of vehicles and employees typically use several of fleet vehicles during the year. It should be noted that this would not apply in a situation where an automobile is used substantially for personal use and an employee voluntarily surrenders the keys during a period of absence from work for purposes of reducing the standby charge. In this case, the days when the employee chooses to surrender both the automobile and the keys at his discretion must be counted in the total available days.
We trust that these comments will be of assistance.
Yours truly,
Randy Hewlett
Manager
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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