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Principal Issues: [TaxInterpretations translation] Does the use of motor vehicles provided by the employer in the situation described above result in a taxable benefit to be included in the income of employees using such vehicles?
Position: Question of fact. In this case, the automobile would not be available to the employee during the winter season.
Reasons: Income Tax Act, Jurisprudence.
September 6, 2011
XXXXXXXXXX Tax Services Office Headquarters
Business and Partnerships Division personnes
Automobiles made available to employees
This is in response to your note dated March 30, 2011, in which you requested our opinion regarding the period during which automobiles, as defined in subsection 248(1) of the Income Tax Act (the "Act"), are made available to employees for the purpose of calculating the standby charge under subsection 6(2) of the ITA.
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
The facts in this case were summarized by the taxpayer and accepted by the TSO as follows:
- XXXXXXXXXX (the "Automobile") is a XXXXXXXXXX vehicle. The TSO and taxpayer representatives have already established that that vehicle meets the definition of automobile in subsection 248(1);
- The taxpayer, XXXXXXXXXX, provides an Automobile to each of its executives for a period of XXXXXXXXXX years;
- The Automobile that is made available to an employee is not available to any other person, other employee or the taxpayer during the winter period due to its type;
- The Automobile is not designed for winter driving XXXXXXXXXX, that is to say on a snowy and/or ice-covered road and it is not recommended for that vehicle to be used under such conditions. That warning is communicated in the driver's Guide to Operation and Safety and is included on the warning label that is affixed to the Automobile and visible from the driver’s position;
- Under the taxpayer's internal policy, the executive returns his or her Automobile to the taxpayer's facilities to be stored for the period of November 1st to March 31st of the following year. At the same time, the executive employee surrenders the keys and registrations of the Automobile;
- Storage takes place in trailers located in the taxpayer's yard;
- The yard is a fenced site. Only employees assigned to the yard have access to trailers located on that site. The employees assigned to the yard are not executive employees;
- During the storage period, the employee will not have access, use or possession of the Automobile. The corporation owns and controls the property;
- During the storage period, the taxpayer may choose to use the Automobile to perform engineering or other tests that may be appropriate inside or in an area where the roadway is not snowy and/or icy;
- The ownership of the Automobile is always that of the taxpayer;
- On April 1st, the employee can come forward to retrieve the Automobile, the keys as well as the registrations;
The following additional facts have been provided to us XXXXXXXXXX:
- The employer is responsible for the following expenses:
- Preparation and assembly of the Automobile;
- All documents required by the responsible authorities for the use of the Automobile, including registration and registration fees;
- The tarp, if necessary;
- Premiums for civil liability insurance coverage;
- Reasonable storage and warehousing costs subject to certain conditions;
- A trailer, if necessary;
- Mechanical breakdowns not covered by the warranty;
- Following an accident, expenses incurred above the deductible of $XXXXXXXXXX (or the equivalent, depending on the region);
- The cost of replacing the Automobile, in case of theft, above the deductible of $XXXXXXXXXX (or the equivalent depending on the region);
- Parts and accessories added to the Automobile up to the maximum amount allowed.
- The employee is responsible for the following expenses:
- Equipment required by law in order to operate the Automobile;
- Maintenance costs (spark plugs and other spare parts);
- All fines levied by the authorities;
- A deductible of $XXXXXXXXXX (or equivalent in the region of use) in the event of auto theft, damage or if the Automobile is involved in an accident;
- The transportation costs of the Automobile if a trailer is provided with it;
- Optional parts and accessories that have been added to the Automobile above the maximum amount allowed;
- The driver's license regulatorily required for the operation of the Automobile.
You wish to know whether to include the period during which the Automobile is stored at the employer's place in calculating the benefit for the purposes of subsection 6(2).
Where an employer makes an automobile available to an employee and the person may use it for personal purposes, the employee shall include in computing the employee’s employment income an amount that is a reasonable standby charge for its use. That benefit is provided for in paragraph 6(1)(e) and subsection 6(2).
The expressions " total number of days … in a taxation year during which the automobile is made available to a taxpayer … by the employer of the taxpayer” and “total available days” used in subsection 6(2) refers to the total number of days in a taxation year in which an automobile is made available by the employer to an employee. That total number of days, including weekend days, includes the first day the automobile is made available to the employee and each subsequent day until the employee is required by the employer to return the automobile and hand over control to the employer.
In that respect, an automobile is at the disposal of an employee if the employee has access to it or has control over it. In general, the employee ceases to have access when the employee returns all keys. However, we are of the view that this is essentially a question of fact that can only be resolved in the light of the particular circumstances of each situation.
In MacMillan v. The Queen, 2005 TCC 583, Bowie J of the Tax Court of Canada, made the following comments:
I have no reason to disbelieve the evidence of the Appellant. I find that he was required by his employer to keep the Hydro van at home during the hours that he was not working, so that it would be available to him if he were called out to deal with some emergency. I also find that he was under a strict prohibition against using the vehicle for any purpose other than going back and forth between his home and the Hydro garage, and other travel while on duty as a Hydro employee. In my view this does not bring the Appellant within the scope of paragraph 6(1)(e) of the Act, because the employer has not made the vehicle available to the Appellant. It is quite clear that the expression "made available", read in its context, is only satisfied where the employee has discretion to use the automobile for his own personal purposes. Clearly that is not the case here. Mr. MacMillan was not free to use the vehicle as he pleased. He was not even free to not use it, as it was required of him that he have it immediately available both during the day when he was at work, and also during the time he was at home and not at work. I find that the Appellant is not subject to assessment for a standby charge in respect of the vehicle.
In this situation, the parties agreed that the taxpayer has made an Automobile available to each of its senior employees for a period of 7 months each year. We must now determine from the facts whether an Automobile is also available to those employees for the months of November, December, January, February and March.
In this case, given the nature of the property, it is recognized that the Automobile cannot be used during the winter season XXXXXXXXXX and needs to be stored during that period.
For an automobile to be made available to an employee, the employee must have access or control. In other words, it is necessary that the employee has the right to use it for personal purposes. In this case, it must therefore be determined whether the executive employees have access to the Automobiles during the months of November, December, January, February and March.
Based solely on the facts described above, and to the extent that it can be demonstrated that employees have no rights, under any circumstances, to use Automobiles during the months of November, December, January, February and March, we are led to believe that executive employees do not have access to or control over Automobiles when they are in storage. That prohibition on use should generally be evidenced in writing formally prohibiting the use by employees of Automobiles during the months of storage. In such a case, the benefit for reasonable standby charges should be calculated on the basis that the Automobiles are made available to the executive employees for a period of 7 months per year.
Of course, if it were possible for employees to use or have access to the Automobiles during the months in which they are in storage, we would be of the view that the benefit for reasonable standby charges should be calculated on the basis that Automobiles are made available to executive employees for all months of the year.
Access to Information
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Ms. Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.
We hope these comments will be helpful. If you would like additional information regarding the content of this document, do not hesitate to contact us.
François Bordeleau, Advocate
Business and Partnerships Division
Income Tax Rulings Directorate
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