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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: 1. Whether ghost car would be "clearly-marked emergency vehicle"; 2. Whether extended-cab pick-up truck would be automobile where its rear seat was removed; 3. Whether standby charge and operating cost benefit would arise from ghost car made available to officer while on call; 4. Whether standby charge and operating cost benefit would arise from availability and use of vehicle modified to carry police dogs by officer in charge of caring for a dog that resides with the officer.
Position: 1. Ghost car would not be clearly-marked vehicle; 2. Would not be considered automobile if it was used, in the year of acquisition, all or substantially all for transporting goods, equipment, or passengers for employment-related purposes; 3. Standby charge and operating benefit could arise from ghost car being made available to officer while on call; 4. No benefit likely with respect to availability and use of Dog vehicle since there is no personal use.
Reasons: 1. Clearly-marked emergency vehicle refers to a vehicle that is readily identified by the general public as a police or fire vehicle due to symbols or lettering on the vehicle. Since ghost cars are designed to be non-descript vehicles they would not be clearly-marked; 2. Extended-cab pick-up trucks have a seating capacity for more than the driver and two passengers notwithstanding the removal of the rear seat. Therefore, they must meet the "all or substantially all" test to be excluded from the "automobile" definition. 3. Use of ghost car to travel between home and work would be personal, as would trips undertaken while on call that were made primarily for personal reasons. Accordingly, standby charge and operating benefit may be applicable. 4. Consistent with Hoedel case, where an officer is fully responsible for care and training of police dog that stays in the officer's home, travel with the dog between home and work would be considered employment-related.
2003-002935
XXXXXXXXXX Wayne Antle, CGA
(613) 957-2102
November 20, 2003
Dear XXXXXXXXXX:
Re: Employment-Related Automobile Benefits
This is further to your letter of July 3, 2003, concerning whether certain motor vehicles owned by the city of XXXXXXXXXX (the "City") and used by police officers and other municipal employees would be considered automobiles made available for the employees' use for the purpose of calculating a standby charge and operating cost benefit. You have also requested an advance income tax ruling with respect to four scenarios involving the availability and use of city-owned motor vehicles.
As noted in Information Circular IC 70-6R5, an advance income tax ruling will only be considered when it is in respect of a specific proposed transaction, and submitted in the manner set out in this circular. However, we will provide you with the following comments, which may be of assistance.
Employees are required to include in their employment income the value of benefits derived from the availability and personal use of automobiles supplied by their employer. With respect to the availability of the automobile, paragraph 6(1)(e) of the Income Tax Act (the "Act") provides that employees must include a "reasonable standby charge" in their employment income. In general, pursuant to subsection 6(2) of the Act, the reasonable standby charge is calculated as 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 is made 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 1,667 kilometres per month and the business-use portion of the total kilometres travelled is 50% or more.
Paragraph 6(1)(k) of the Act provides that, where an employer pays the operating costs of the automobile, the benefit for personal use of the automobile is computed by multiplying a prescribed rate (currently 17¢ per kilometre) by the number of personal kilometres driven. However, where 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 17¢ per kilometre calculation.
Paragraphs 6(1)(e) and 6(1)(k) of the Act only apply with respect to an "automobile" as defined in subsection 248(1) of the Act. Where the motor vehicle does not fall within the definition of "automobile", any benefit derived from the availability and use of the vehicle would be calculated on a reasonable basis, and included in income pursuant to paragraph 6(1)(a) of the Act.
In your letter, you requested our views on the definition of "automobile" as it relates to "clearly marked emergency-response vehicles", and (in your fourth scenario) certain pick-up trucks. You also presented three scenarios, and asked for our comments as to whether an employee would receive an automobile benefit pursuant to paragraphs 6(1)(a), 6(1)(e) and 6(1)(k) of the Act in each situation. We will provide our comments on the definition of "automobile" including your fourth scenario, followed by comments on the first three scenarios presented in your letter.
Definition of "Automobile"
"Automobile" is defined in subsection 248(1) of the Act to mean "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 8 passengers..." However, the definition of "automobile" provides for certain exceptions, which may be relevant for city-owned vehicles. These exceptions include:
1. a clearly marked emergency-response vehicle that is used in connection with or in the course of an individual's office or employment with a fire department or the police,
2. a van or pick-up truck that has a seating capacity of not more than the driver and two passengers, that is used, in the year acquired, primarily for the carrying of goods or equipment for employment-related purposes,
3. a van or pick-up truck that is used, in the year of acquisition, all or substantially all for the transportation of goods, equipment, or passengers for employment-related purposes.
Clearly-marked Emergency Vehicles
With respect to the first exception, in order for a vehicle to be considered "clearly-marked", it is our view that the vehicle must be readily identified by the general public as a police or fire vehicle because of symbols and/or lettering on the vehicle. Therefore, a ghost car, by its very design, would not be considered a clearly-marked vehicle.
Extended-Cab and Super-Cab Pick-up Trucks
With respect to the two noted exceptions involving pick-up trucks, you presented the following scenario:
1. An extended cab pick-up truck is understood to mean a mid-size or full-size pick-up truck with two regular access doors to the passenger compartment. Typically, such pick-up trucks are capable of carrying the driver, passenger and perhaps two or three occupants in the extended-cab area on a bench seat.
2. A super-cab pick-up truck is understood to mean a full-size pick-up truck with four regular access doors to the passenger compartment. Typically, such pick-up trucks are capable of carrying the driver and up to two passengers in the front seat, as well as up to three passengers in the secondary seating area.
3. The City modifies extended and super-cab pick-up trucks by permanently removing the bench seat from the extended cab portion to facilitate the carrying, storage and transportation of equipment necessary at various job sites.
4. The City's trucks are used by City employees for the purposes of carrying out the City's business. For example, trucks assigned to the Public Works department are used by City employees in the course of engineering, construction and repair of the City's roads and waterworks.
5. The City permanently retains the removed seating apparatus at its public works yard and the seating apparatus is not reinstalled into the truck until such time as the Service Vehicle is retired.
It is our general view that the trucks would not fall within the second exception in the definition of automobile listed above unless the removal of the rear seats could be said to have permanently altered the vehicle such that the seats could not easily be refitted into the truck. We feel that the extended-cab and super-cab pick-up trucks would likely have a seating capacity for more than the driver and two passengers because it does not appear that the trucks were permanently modified in such a way that the seats could not easily be refitted into the vehicles. Accordingly, in order for the trucks to be excluded from the definition of "automobile" they must fall within the third exceptions outlined above, and therefore must have been used, in the year acquired, all or substantially all for transporting goods, equipment, or passengers in the course of earning employment income.
Taxable Benefits from Availability and Use of Automobile
Scenario 1
The XXXXXXXXXX (the "Board") assigns vehicles to police officers as follows:
1. The Board maintains a fleet of unmarked police vehicles ("ghost cars") for use by police officers in the course of their normal day-shift.
2. The vehicles are sedans equipped with radios, computer docking stations, sirens, and low-profile flashing strobe lights.
3. Officers are assigned ghost cars on a daily basis for day-shift use in the course of conducting police business, including patrol, investigation, and surveillance.
4. Officers return the ghost cars and the ignition keys to police premises at the end of each day-shift.
5. The police officers drive their personal vehicles to and from work on a daily basis.
6. The Board's Police Vehicle policy strictly prohibits personal use of any ghost car assigned to an officer.
Response
In the above situation, the ghost car is neither made available to the officer, nor used by the officer for any purpose other than the performance of his or her employment duties. Accordingly, the police officer would not be considered to have received any benefit with respect to the ghost car.
Scenario 2
1. A ghost car owned or leased by the Board is assigned to the police officer at the beginning of his or her regular work day for use by the officer to carry out his or her employment duties.
2. The police officer's regular work is comprised of a 12 hour on-duty day shift combined with a 12 hour on-call night shift. The typical shift rotation is four 24-hours shifts in a regular shift rotation of twelve days.
3. During the regular day-shift, the ghost car is used exclusively in the conduct of police business.
4. During the night-shift, the officer is on-call (and therefore, on-duty) and the ghost car is on stand-by for dispatch to attend emergency situations, without the discretion of the police officer. As such, the Board and police officer consider the vehicle at all times to be used exclusively in the conduct of police business.
5. Use of the vehicle by the police officer during the night-shift other than as dispatched by the employer is considered by the officer and the employer to be an on-duty patrol. In other words, where the employee drives the vehicle during the night-shift (other than as dispatched by the employer) and encounters an emergency situation, the employee must respond accordingly.
6. Personal use of the automobile by the police officer at any time is not permitted under the Board's written policy. The officer's family members are not permitted in the vehicle at any time and may not travel in the vehicle for any reason.
7. As per the Board's written policy, dispatched emergencies must be attended by the officer in the assigned vehicle. Therefore, the assigned vehicle must be driven to, and parked at, the employee's place of residence during the on-call portion of the shift.
8. The assigned vehicle and its ignition keys are returned to the Board's custody at the end of each 24-hour shift.
Response
In the above scenario, the officer may be considered to have received an employment benefit with respect to the availability and use of the ghost car. As discussed above, the ghost cars would fall within the definition of "automobile" in subsection 248(1) of the Act. Accordingly, paragraphs 6(1)(e) and (k) would apply to the calculation of the taxable employment benefit. With respect to the standby charge, the benefit may be reduced where the vehicle is driven less than 1,667 kilometres for personal use, and the vehicle is used primarily for police business. The operating benefit would be determined by multiplying the personal kilometres driven by the prescribed rate (currently 17¢). Alternatively, where the automobile is driven primarily for employment-related purposes, the officer can elect to calculate the operating cost benefit as one-half of the standby charge. Please refer to the 2003 Employer's Guide to Taxable Benefits for more information on the calculation of the standby charge and operating cost benefits.
In order to determine whether an automobile is driven for employment-related purposes or personal purposes, all of the facts must be considered. Where the primary purpose of the trip is employment-related, then the distance driven would not be considered personal. Where the primary purpose of a particular trip is personal in nature, then it is treated as such for tax purposes regardless of any employment activity which may take place during the course of that trip.
As noted in paragraph 5 of Interpretation Bulletin IT-63R5, travel between an employee's place of work and home, even if the employee may have to return to work after regular duty hours, is considered personal. However, an exception occurs where, as required by the employer or with the employer's permission, an employee proceeds directly from home to a point of call other than the employer's place of business to which the employee reports regularly, or returns home from such a point. In such cases, the trip would be considered employment-related where its primary purpose was to carry out work-related duties.
Given the facts outlined above, we would expect that almost all of the distance driven in the ghost car would be work-related. Accordingly, any standby charge attributable to the availability of the ghost car would be substantially reduced by reason of the new formula in subsection 6(2) of the Act. Likewise, the operating cost benefit computed under paragraph 6(1)(k) should be relatively minor, where personal travel is not significant (whether the benefit is based on 17 ¢ per kilometre, or the officer elects to base the calculation on one-half of the standby charge).
Scenario 3
1. Each officer assigned a police dog is solely responsible for feeding, kennelling, arranging for veterinary attention and attending to all other needs of the police dog. The officer is required to make appropriate alterations to his/her personal residence to accommodate the animal.
2. The officer is required to maintain the dog on a 24-hours basis (including vacations, sick time and other personal leave) as a condition of employment.
3. The officer is solely responsible for training, socializing, exercising and instructing the dog, typically, for a term of four to five years.
4. No other officers are permitted to instruct, train, transport or otherwise handle the dog.
5. The city pays for all food, special equipment and veterinary bills of the dog, and provides the officer with a vehicle that has been specifically modified to safely transport the dog ("Dog Vehicle"). For safety reasons, the dog must be transported in the specially modified Dog Vehicle.
6. The Dog Vehicles are XXXXXXXXXX, which have been specifically modified by removing the rear passenger seating and installing special kennels, radios and computer communications equipment, which takes up a considerable portion of front passenger seating.
7. Officers with Dog Vehicles are strictly advised that the vehicles may not be driven for personal use. However, officers with Dog Vehicles are required to drive that vehicle between home and work on a daily basis.
Response
Consistent with the decision of the Federal Court of Appeal in the case of Hoedel v. the Queen (86 DTC 6535), where a police officer is responsible for the care, training, and socialization of a police dog and the dog lives at the officer's residence, then travel between home and work with the police dog would constituted employment-related travel. Since the facts presented above indicate that the Dog Vehicle is not used for personal travel, and travel between home and the officer's work location with the dog is considered employment-related, the officer would not be considered to have received a taxable employment benefit with respect to the Dog Vehicle.
The publications mentioned above can be obtained from our website at www.ccra.gc.ca.
We trust that our comments will be of assistance.
Yours truly
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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