7 November 2001 External T.I. 2001-0095785 - TAXABLE BENEFITS-VEHICLES&ALLOWANCES

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:

Employment benefits with respect to the personal travel in connection with the use of an employer's vehicle, and subsistence allowances while at a work site other than the employer's place of business.

Position:

General comments provided.

Reasons:

Insufficient information provided to provide a specific opinion. Comments provided on exceptions in paragraph 6(1)(b) and subsection 6(6).

XXXXXXXXXX 2001-009578

Randy Hewlett, B.Comm.

November 7, 2001

Dear XXXXXXXXXX:

Re: Taxable Benefits - Use of Company Vehicle and Subsistence Allowances

We are writing in response to your letter dated July 25, 2001, wherein you requested our opinion on the taxability of employee benefits with respect to:

(1) What constitutes personal travel for the use of a company vehicle for travel to a job site by a group of employees, required in accordance with a union contract. In the situation outlined, the employees are not required to report to the employer's office before travelling to the work site, but often do so to pick up paperwork and supplies. The employee who has been issued the vehicle will pick up other employees and drop them off when returning home in the evening. The employee has access to the vehicle at nights and on weekends because the company does not have a compound to park the vehicle overnight. However, the employee is not allowed to use it for personal purposes.

(2) Subsistence allowances that are paid to certain employees with respect to "accommodation, room and board, turnaround pay and travel in and out" in accordance with a union contract. This allowance applies to any employee "XXXXXXXXXX".

Our Comments

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 an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R4, Advanced Income Tax Rulings, dated January 29, 2001. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer the following general comments.

(1) Personal Travel - Employer Provided Vehicle

Where an employer provides transportation from the employees' home to their work location, generally there is a taxable benefit conferred on the employees since travel between the employees' residence and their regular place of work is personal. There are exceptions, however, such as where an employee proceeds directly from home to a point of call other than the employer's place of business to which the employee regularly reports. Establishing whether a particular work site constitutes a work location to which an employee regularly reports, can only be determined after reviewing all of the facts including the frequency to which a particular location is visited, and the degree of travelling required by the employee regardless of the destination.

Determining the value of the benefit to include in an employee's income depends on whether the vehicle in question is a "passenger vehicle" or a "motor vehicle," as defined under section 248(1) of the Income Tax Act (the Act). Employee benefits for the use of a passenger vehicle (i.e. an "automobile") are included in income under paragraph 6(1)(e) of the Act as "standby charges" and depend upon factors such as whether the vehicle is available for employee use, and the personal versus business use of the vehicle. Employee benefits for the use of motor vehicles, other than passenger vehicles, are based upon a reasonable calculation of the value of the benefit derived by the employee, which can vary in differing circumstances, again depending upon such factors as personal use of the vehicle.

Without all pertinent information, such as that noted above, we cannot provide a more direct answer to your inquiry. However, we suggest that you consult Interpretation Bulletin IT-63R5 Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992, dated August 21, 1995. This bulletin can be found on our Internet website at www.ccra-adrc-gc-ca.

(2) Subsistence Allowances

Generally, the value of all benefits received or enjoyed by an employee from an office or employment are taxable. There are exceptions to this rule, such as those listed in paragraph 6(1)(b) and subsection 6(6) of the Act. Unfortunately, we do not have sufficient information to comment specifically on each element of the subsistence allowance outlined in your letter. You may, however, find the following general comments useful.

One exception is in subparagraph 6(1)(b)(vii) of the Act, as it relates to travel expenses, such as meals, accommodations and transportation. This provision excludes from employment income, a reasonable allowance for certain travel in connection with the duties of employment. For this exclusion to apply, the employee must be travelling away from the municipality in which the employer's business is located, at which the employee is regularly required to report to work.

The exception in subsection 6(6) of the Act applies to allowances received in respect of transportation to, and board and lodging at, a special work site or remote work location. The allowance must, among other things, be in respect of a period during which the employee was required by the duties of employment to be away from his or her principal place of residence, or to be at the special work site or remote work location, for a duration of not less than 36 hours.

In addition, you specifically inquired about duties of a temporary nature at a special work site. Paragraphs 5 and 6 of Interpretation Bulletin IT-91R4, Employment at Special or Remote Work Locations, dated June 17, 1996, contain comments on whether employment duties at a special work site will be considered temporary. The term temporary, while not defined in the Act, generally refers to situations where continuous employment is not beyond a period of two years. This bulletin can also be found on our Internet website.

It appears that one of these exceptions, either subparagraph 6(1)(b)(vii) or subsection 6(6) of the Act, may apply to the portion of the subsistence allowance that relates to "accommodation, room and board" and "travel." Without additional information that would indicate otherwise, however, it is our view that the portion of the subsistence allowance with respect to "turnaround pay" would be a benefit included in income under paragraph 6(1)(a) of the Act or included in regular employment income under subsection 5(1). Based upon the information supplied, there is no apparent exception that could possibly exclude the allowance from inclusion in income as an employment benefit.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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