2 February 2011 External T.I. 2010-0385881E5 - Taxable Benefits - Shuttle home to work

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: On what basis should an employment taxable benefit be calculated?

Position: Question of fact, but generally Fair Market Value

Reasons: Subject to certain listed exceptions, paragraph 6(1)(a) of the Income Tax Act requires that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment be included in the taxpayer's income from employment.

XXXXXXXXXX
									2010-038588
									Brenda White
									519-645-5454
February 2, 2011

Dear XXXXXXXXXX :

Re: Taxable Benefits - Shuttle Service

This is in response to your letter of November 1, 2010 wherein you asked for clarification on the calculation of a taxable benefit for providing a shuttle service to employees.

In the situation you described, XXXXXXXXXX (the "Employer") is considering providing a shuttle service to its employees for transportation between each employee's residence and the Employer's location where the employees regularly work.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Subject to certain listed exceptions, paragraph 6(1)(a) of the Income Tax Act (the "Act") requires that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment be included in the taxpayer's income from employment. This is confirmed in Chapter 1 of the CRA publication T4130, "Employers' Guide -Taxable Benefits and Allowances."

A benefit will arise if an employer pays a personal expense of the employee. It is the CRA's long-standing position that costs incurred by an employee to travel between home and a regular place of employment are generally personal in nature. Accordingly, providing a shuttle to employees for this purpose will result in a taxable benefit.

We note that although the CRA has taken the administrative position that employer-paid travel between home and work will not be a taxable employment benefit where an employee is required to work overtime under certain specific conditions, this exception does not appear to be applicable to the proposal you have described.

With respect to the value of a benefit, the CRA and the courts have considered a number of different valuation criteria over the years, for example: cost, average cost to the employer, incremental cost to the employer, resale value to the employee, comparable purchase cost and fair market value. It has generally been decided that where possible, fair market value should be used.

The calculation of the fair market value of a benefit received is a question of fact that should take into account all the circumstances of the particular situation. Information Circular 89-3 "Policy Statement on Business Equity Valuations", provides the following guidance with respect to the concept of "fair market value":

"Fair market value is the highest price, expressed in terms of money or money's worth, obtainable in an open and unrestricted market between knowledgeable, informed and prudent parties acting at arm's length, neither party being under any compulsion to transact."

Whether calculating a taxable benefit based on mileage traveled is a reasonable estimate of fair market value for shuttle transportation is a question of fact depending on the circumstances of the situation. It is an employer's responsibility to determine the taxable benefit, if any, being received by an employee. The onus is therefore on the employer to ascertain the fair market value. As is the case with the calculation of many taxable benefits, amounts paid by the employee to the employer will generally reduce the amount of the calculated taxable benefit.

The "Benefits Chart" at the end of CRA guide T4130 describes the reporting and withholding requirements for providing a non-cash benefit consisting of transportation to and from the job. It confirms that as a taxable benefit, it is pensionable for Canada Pension Plan purposes but not insurable for Employment Insurance purposes. Additional information on reporting and withholding may be found in Guide T4001, "Employers' Guide - Payroll Deductions and Remittances."

We trust these comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch