Paragraph 6(1)(b) - Personal or living expenses
Cases
Bériault v. Canada, 2004 DTC 6522, 2003 FCA 430
A lump sum of $65,120 that the taxpayer received from his employer as a result of his transfer from Montreal to Toronto was an allowance within the meaning of s. 6(1)(b) given that the amount did not correspond to the amount of the expenses or loss incurred by the taxpayer, and he had no obligation to account to his employer for his costs or actual expenses.
Rio v. Canada (Attorney General), 2004 DTC 6079, 2003 FCA 396
Payments to the taxpayer of a monthly accommodation allowance, a monthly cost of living allowance and a "monthly function" allowance while he was in Toronto constituted predetermined amounts that did not correspond to the actual amount of the expenses incurred by him and he could use the allowances as he chose. Accordingly, the allowances were required to be included in his income under s. 6(1)(b).
The Queen v. Côté, 99 DTC 5788, 1999 CanLII 8469 (FC) (FCTD)
The taxpayer, who was a senior Quebec civil servant, was taxable on a lump sum equal to four weeks' salary that compensated him for expenses of a compulsory move from Quebec City to Montreal given that the amount qualified as an allowance (i.e., a limited and predetermined amount that was paid to cover personal expenses in lieu of reimbursement and for which there was no obligation to account).
Verdon v. The Queen, 98 DTC 6175 (FCA)
The taxpayer received a meal allowance of $1,440 per year which was calculated and advanced, based on past experience, at $7 per meal, four days per week, and was intended to cover the cost of his having meals while he worked at an office away from his home. Linden J.A. found (at p. 6176) that the amounts were includible in income as allowances:
"(1) these amounts were an arbitrary or fixed amount, that was determined in advance ... .; (2) they were paid to cover personal expenses in lieu of reimbursements; and (3) there was no obligation to account for them."
With respect to the different treatment accorded to reimbursements and allowances, he stated (at p. 6176) that "this is felt to be necessary in order to ensure that allowable, reimbursed, personal expenses are accurately recorded ... ."
Attorney General of Canada v. MacDonald, 94 DTC 6262 (FCA)
A monthly housing subsidy of $700 that was payable to an RCMP member as a result of his relocation to Toronto was taxable under s. 6(1)(b) because it had all the legal characteristics of a taxable allowance. It was a limited, pre-determined, "round" amount, its purpose was to subsidize his accommodation costs and he received the amount totally in his discretion without any requirement to actually incur any accommodation expenses.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 5 - Subsection 5(1) | 76 |
Blanchard v. The Queen, 92 DTC 6585 (FCTD)
The taxpayer would not have accepted employment at Fort McMurray if his employer had not provided an arrangement under which a nominee of the employer ("Northward") sold a home to the taxpayer under a long-term agreement of purchase and sale. In finding that a payment made seven years later by Northward to the taxpayer in order to eliminate its contingent obligation to buy back the taxpayer's home was not an allowance for purposes of s. 6(1)(b), Jerome A.C.J. noted that the amounts were paid in satisfaction of a previous contractual obligation and were not intended for the taxpayer's personal gain or to underwrite personal extravagances; and were intended to reimburse him for the loss of rights.
Splane v. The Queen, 90 DTC 6442 (FCTD), briefly aff'd 92 DTC 6021 (FCA)
The taxpayer, who was asked by his employer to relocate from Ontario to Alberta, sold his home in Smith Falls for $65,000 and purchased a home near Edmonton for $63,000. In each of the subsequent three taxation years, the taxpayer was reimbursed by his employer for the difference between the mortgage interest (of 14.25%) paid by him in respect of his new home and the prior interest rate of 12.5% payable on the mortgage on his Smith Falls home. Because the payments in question were reimbursements made after the expenses were actually incurred by him due to the higher interest rates that were in effect at the time he moved, they did not constitute a taxable allowance.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | payment of increased house mortgage interest merely reimbursed for a loss | 110 |
The Queen v. Huffman, 90 DTC 6405 (FCA)
By virtue of the collective agreement between the Niagara Regional Police Force and the Niagara Police Association, each plainclothes officer (including the taxpayer) was entitled to be reimbursed by the Board for expenses in the purchase of clothing worn in carrying out duties of employment in an amount not exceeding $500 per annum. The Crown unsuccessfully submitted that the difference between the payment to the taxpayer of $500 and the total of the receipts submitted by him of $425.23 was an allowance pursuant to s. 6(1)(b).
The Court accepted that when the reimbursement amount had been increased from $400 to $500 pursuant to the 1979 collective agreement, an administrative decision had been taken that officers would not be required to submit receipts above $400, in order to avoid extra paperwork, and that the taxpayer had spent more than $500. Accordingly, no part of the reimbursement of $500 could be said to be an allowance.
See Also
Sénéchal v. The Queen, 2011 DTC 1357 [at 1997], 2011 TCC 365 (Informal Procedure)
The taxpayers were police union representatives. Although they continued to receive their regular remuneration from the police force, they could spend up to a specified number of hours on union duties (e.g., 1000 hours per year). They received funds from the police union for various expenses including transportation and meal expenses, and in some instances child care, internet and computer expenses and allowances for attending union meetings. These amounts were often paid in a fixed amount without receipts being required.
Lamarre J. affirmed the Minister's position that amounts received were taxable, generally as taxable allowances. Respecting amounts received from the union to compensate for home office expenses, he stated (at para. 37):
[T]hese expenses constitute personal expenses that the appellants would have incurred even if they did not have union duties. An employer's payment of an employee's regular or current expenses constitutes a taxable benefit. In reimbursing the appellants this way, under the pretext that they use their computers to carry out union tasks, the Police Union was giving the appellants a form of remuneration.
McLay v. MNR, 92 DTC 2260 (TCC)
A "transfer allowance", equal to one month's salary, which the taxpayer received from his employer pursuant to a general policy to pay such amounts on relocation to another city was a taxable allowance given that: its amount was predetermined as one month's salary and was not dependent upon or related to any particular expenses; it was intended to enable him to discharge certain unspecified kinds of moving expenses; and the amount was at his complete disposition.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 62 | 96 |
Administrative Policy
27 September 2011 External T.I. 2011-0400141E5 F - Allocations pour frais de déplacement
Employees, who are called upon to travel within the metropolitan area of their usual place of work to meet clients, receive a daily meal allowance of $17 per day worked (including those where they are not travelling) so that they can remain on the road and thus be more efficient. Is the allowance taxable?
After noting its position in ITTN No. 40 that “a travel allowance paid by the employer in respect of travel within the municipality or metropolitan area of an employee for the purpose of the performance of the duties of the employee’s office or employment may be excluded from income if … the allowance is reasonable [and] is paid primarily for the benefit of the employer,” CRA stated:
[A]n allowance would be paid primarily for the benefit of the employer if the principal objective of the allowance is to ensure that the employee's duties are undertaken in a more efficient manner during the course of a work shift, and where allowances paid are not indicative of an alternate form of remuneration.
In such a case, we are generally of the view that the allowance of $17 paid for the days during which the employees are travelling should not be included … . However, they should include in computing their income the allowance of $17 they receive while they are not travelling, as that allowance is not based on an estimate of the average travel expenses they incur.
24 April 2012 Internal T.I. 2012-0440711I7 F - Indemnité de repas; remboursement pour déplacement
An employer who does not have a cafeteria or dining room, pays its employees a meal allowance per day worked, which barely covers the cost of food (or, alternatively, meal voucher could be issued for use in grocery stores or restaurants). The employer also partially reimburses the cost of public transportation for commuting to and from work.
After noting its practice in IT-470R, para. 28 respecting subsidized meals provided to employees being a taxable benefit “provided the employee is required to pay a reasonable charge,” CRA stated that, in contrast:
[M]eal allowances constitute a benefit from an office or employment, to be included in the computation of the employee's income for the year. As a result, the total amount of the allowances, as well as meal vouchers, should be included on the T4 slip in box 14 … .
Furthermore:
[W]here an employer provides an employee with an allowance for transportation between the employee's residence and the employee’s regular place of work, a taxable benefit is usually conferred on the employee.
13 April 2018 External T.I. 2017-0682891E5 - Taxable benefits
The employer provides fixed monthly payments to school bus drivers to cover such employees’ cost of the use of a personal cellular phone, bus washing (e.g., at a car wash), and electricity consumption (to cover the cost for plugging in the employer’s school bus at the employees’ residence to ensure that the bus would start in the morning) should be included in the employee’s income. Before finding that these amounts were taxable under s. 6(1)(b), CRA stated:
[T]he use of a personal cellular phone, bus washing, and electricity consumption would be considered an allowance because the employees are not required to submit receipts to receive the payments from the employer.
4 December 2018 External T.I. 2016-0670851E5 - Regular Places of Employment and Personal Travel
Respecting requested clarification as to when a particular work location is considered a regular place of employment for an employee, CRA stated:
[T]ravel between an employee’s home, including a home office, and a regular place of employment (RPE) is generally considered personal travel … .
A RPE is any location where an employee regularly reports for work or performs the duties of employment. In this case, “regular” means there is some degree of frequency or repetition in the employee’s reporting to that particular work location in a given pay period, month, or year. This “place” does not have to be an establishment of the employer. For example, a work location may be considered to be a RPE for an employee even though the employee may only report to work at that particular location on a periodic basis (e.g., once or twice a month) during the year.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(6) - Paragraph 6(6)(b) - Subparagraph 6(6)(b)(i) | travel between temporary place of residence and special work site not excluded | 131 |
19 July 2018 External T.I. 2014-0551941E5 F - Déplacement effectué par un employé
An employee who is auditor at an accounting firm must travel to various of the firm's clients in a year for engagements of approximately one to two weeks per client. Is the allowance received by the employee from the firm for travel in the course of these engagements taxable?
After repeating its position that “personal travel includes travel between the employee's home and ‘regular place of employment’,” and noting that “regular place of employment” was described in T4130 as including “a client's premises when an employee reports there daily for a six month project” and “a client's premises if the employee has to attend biweekly meetings there,” and before noting that it could only make general comments, CRA stated:
If the place of business of a client of the firm constitutes a "regular place of employment " for the auditor, the travel between the auditor’s residence and the place of business of that client is considered personal travel and is therefore not considered travel "in the performance of the duties of the employee’s office or employment". Consequently, the allowance received from the firm by the auditor in the year for this travel must be included in the auditor’s income by virtue of paragraph 6(1)(b).
28 April 2017 Internal T.I. 2017-0699741I7 - Phoenix - financial advisor funding
Errors in the Phoenix pay system used by the employer resulted in employees being overpaid and/or underpaid in 2016 or 2017, and their T4 tax slips being incorrect. The employer will reimburse for the cost of tax advisory services provided by an accountant to help the employees understand the impact of such errors on their 2016 or 2017 income taxes, prepare their 2016 or 2017 income tax return in cases where their income tax situation has been affected by the errors, and reconcile income reported on an employee’s 2016 or 2017 tax slip against income actually received by the employee. CRA stated:
Generally, compensation paid to an employee by their employer for financial loss incurred due directly to the employer’s error is not included in income since the employee is being restored to a previous economic position. Therefore, reasonable employer reimbursements for the cost of tax advisory services incurred as a direct result of Phoenix pay system errors will not be included in the employee’s income and will not have to be reported on the employee’s T4.
2 October 2014 External T.I. 2013-0491411E5 F - Allocation pour une automobile
What is the tax treatment of amounts paid to taxpayers for using their cars in providing lifts for the organization? CRA stated (TaxInterpretations translation):
Services are rendered in the course of employment where there is an employer-employee relationship between the parties. In order to determine whether there is such a relationship, it is necessary in Quebec to take into account the principles of the Civil Code of Québec in analyzing the following three essential elements: performance of work, remuneration and a relationship of subordination between the parties. ...
In situations similar to the particular situation, where the services are not performed in the course of an employment or business, we are of the view that the amounts received do not have to be included in the computation of income of the taxpayer.
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|---|---|---|
| Tax Topics - Income Tax Act - Section 3 | compensation for car rides not received in the course of employment or a business | 174 |
May 2016 Alberta CPA Roundtable, Q.3
2013-0507421E5 indicated that if an individual has multiple regular places of employment (RPE) and travels between them during the day, the trip from the individual’s home to the first RPE and the trip home from the last RPE is personal, whereas travel between RPEs is considered employment-related. In this context, is a home office an RPE if work is performed there on a periodic basis (i.e. once or twice a month), and what are the common factors considered in determining if a work location is an RPE or a special work site? CRA responded:
Where an employee works at multiple locations, the regularity of the reporting and the nature of the duties carried on at this location is considered as well as the frequency. For example, if an area manager reports for work at three different stores throughout the year to carry out supervisory duties as required, each of these locations could be considered a regular place of employment. … a location may not be a RPE for an individual if, for example, the individual works at that particular location only once during the year or perhaps for only a few days in the year. …
The CRA’s general position is that travel between an employee’s home and their employer’s business location is personal, even when the employee has a home office that is a regular place of employment. …
CRA does not have a list of common factors used to determine if a work location is an RPE. …
[F]or a location to be considered a special work site…:
1. The duties performed by the employee at that location must have been of a temporary nature,
2. The employee maintained [and resided at] at another location a self-contained domestic establishment (SCDE)…to which by reason of distance, the employee could not reasonably be expected to have returned daily from the special worksite,
3. The employee’s duties required the employee to be at the special work site away from his or her principal place of residence for not less than 36 hours.
If an employee works at a special worksite for an extended period of time, it is our view that the special worksite will most likely be the employee’s regular place of employment. Accordingly, any allowance paid by the employer for the use of the employee’s vehicle for transportation between his or her temporary place of residence and the special worksite would be a taxable benefit under paragraph 6(1)(b).
S2-F3-C2 - Benefits and Allowances Received from Employment
Meaning of allowance
2.56 An allowance or an advance is any periodic or lump-sum payment that an employee receives without having to account for its use. An allowance or advance is:
- usually an arbitrary amount that is predetermined without using the actual cost;
- usually for a specific purpose; and
- used as the employee chooses, since the employee does not provide receipts.
5 July 2015 External T.I. 2015-0588201E5 F - Apportez vos appareils personnels / BYOD
CRA confirmed its view in 2014-0552731E5 that employees, who were required to use cell phones in the performance of their duties, received a taxable allowance when their employer paid them a fixed monthly amount (calibrated to each employee's duties) not in excess of their costs, given that the employer “did not require detailed receipts.”
7 April 2015 External T.I. 2014-0552731E5 F - Apportez vos appareils personnels / BYOD
Employees, who are required to use cell phones in the performance of their duties and to have their cell phone contracts approved by the employer, but bear the monthly costs of the contracts personally. However, the employer pays each a fixed amount based on the particular requirements of each employee not in excess of their costs. The employees do not systematically provide copies of their invoices, but are required to retain them for possible future inspection. CRA stated (TaxInterpretations translation):
Given that you do not require detailed receipts…the monthly payments to your employees for using their personal cell phones required in the performance of their employment do not constitute a reimbursement of expenses. …[T]he monthly payment constitutes an allowance. Consequently, the monthly payment must be included in computing the income of the employee… .
18 December 2014 External T.I. 2014-0523711E5 F - Allocation pour déménagement - achat de meubles
Mr. X who was employed abroad by Company Y, is relocated to work for Company X (an associated Canadian corporation) at a Canadian location. Company X wishes to provide him with relocation compensation that Mr. X could use to acquire new furniture and new supplies. The expenses associated with the relocation of the household articles of Mr. X would be greater than the amount of the compensation amount that would be paid to him. The compensation amount would have a fixed amount and would only be paid on presentation of supporting invoices by Mr X. Would this amount be taxable? CRA stated:
While generally a relocation allowance for which the recipient does not have to justify the use is taxable, [CRA] has an administrative position with respect to relocation allowances of an employee…. This CRA administrative position does not apply to expenses related to the purchase of new goods (such as furnishings, carpets, bedding and household items) or to improvements and repairs of household articles.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | allowance that is capped at documented expenses might not be an allowance/reimbursing new furniture might be taxable benefit | 220 |
1 October 2014 External T.I. 2013-0476081E5 F - Allocation pour une automobile
The only compensation received by taxpayers from a non-profit organization for transporting, using their own automobiles, people with reduced mobility so that they can make health-care appointments, is $0.42 per kilometer traveled. Is this taxable? CRA responded:
In situations similar to the given situation, where the services are not rendered in the course of an employment or business, we are of the view that the amounts received do not have to be included in the computation of income of the taxpayer.
14 February 2014 Internal T.I. 2013-0495661I7 - Taxability of payment from US charitable trust
Monthly allowances received by a former employee of a US charitable trust is not income to him given that they are "financial assistance is based on the individual's personal financial needs" so that "the amounts received from the Fund are likely received in the individual's personal capacity rather than by virtue of the individual's employment." However, "since the criteria of paragraph 56(1)(u) appear to have been met, the financial assistance should be included in the individual's net income under that paragraph and deducted under paragraph 110(1)(f)."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(u) | financial assistance to former charity employee | 86 |
5 October 2012 Roundtable, 2012-0454131C6 F - Caractère raisonnable d'une allocation automobile
Have the CRA auditors been directed to consistently treat motor vehicle allowances exceeding the Reg. 7306 limits as unreasonable for s. 6(1)(b) purposes?
Is a motor vehicle allowance considered to be reasonable if it satisfies the amounts set by the Treasury Board of Canada Secretariat (“TBCS”) to be reasonable, if all other ITA requirements are met?
CRA responded:
No direction has been given to CRA auditors that allowances for the use of a motor vehicle exceeding the limits set out in ITR section 7306 will be systematically considered unreasonable for the purposes of ITA paragraph 6(1)(b).
[T]he limits in section 7306 are only a guide to determining the reasonableness of an allowance for the purposes of paragraph 6(1)(b). Depending on the particular circumstances of each situation, a rate that differs from that provided for in that section could therefore be considered reasonable. In addition, the CRA is of the view that the amounts that the TBCS sets as a travel allowance are reasonable amounts for the purposes of paragraph 6(1)(b).
30 March 2012 External T.I. 2011-0428741E5 F - Allocations pour frais de déplacement
When an employee (a truck driver) reports to work but must return to the employee’s residence because a truck is not yet available, the employer pays him an allowance for travel expenses based on the number of kilometers traveled between his usual place of work and his residence and between his residence and his usual place of work. CRA stated:
We generally consider travel expenses incurred by an employee to travel between their residence and their usual place of work as personal expenses of the employee. Those are generally not travel expenses incurred in the course of the employee's duties; rather, they are expenses that allow the employee to perform those duties.
1996 Ruling 963215 (C.T.O. "Options with SAR Rights")
Where an existing stock option plan is amended by permitting employees to request cash payment for the value of their stock options, s. 7(1)(b) will not apply where an employee requests cash payment and the employer chooses to settle this obligation by issuing shares having a fair market value equal to the economic value of the option.
29 June 1995 Memorandum 951114 (C.T.O. "Taxable Benefits and Allowances - Cleaning")
Following the decision in The Queen v. Huffman, 90 DTC 6405 (FCA), it is the Department's position "that a reasonable allowance in respect of dry cleaning and uniform maintenance would not constitute a taxable benefit to the extent that it is actually expended for that purpose."
26 July 1994 T.I. (C.T.O. "Employment Benefits - Special Clothing")
Although a non-accountable allowance for uniform dry cleaning and maintenance would not constitute a taxable benefit to the employee provided the allowance was reasonable and actually expended, a non-accountable personal grooming allowance would constitute a taxable benefit.
9 February 1994 T.I. 933587
"An employee would not be considered to be in receipt of a taxable benefit with respect to special or protective clothing (including safety footwear) which, by reason of the hazards inherent in the employment duties or by a law of a province or Canada, the employee is required to wear, where the employer provides the employee with a clothing allowance to the extent the allowance is expended on such special or protective clothing."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(iii) | 113 |
13 December 1993 T.I. 932633 (C.T.O. "Transfer Allowance")
A relocation allowance equal to 1/12 or 1/24 of one year's salary of a member of the RCMP will be taxable as remuneration from employment in light of McLay v. MNR, 92 DTC 2261 (TCC).
11 March 1993, T.I. (Tax Window, No. 30, p. 13, ¶2465)
RC generally accepts that a non-accountable allowance for overtime supper money that is less than or equal to the value or cost of a normal meal, where payment of the allowance is not governed by a collective agreement and the requirement to work overtime does not occur frequently, is a reimbursement on account of the cost of the meal and, therefore, it is not subject to tax in the employee's hands.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | 68 |
5 January 1993 T.I. (Tax Window, No. 28, p. 15, ¶2402)
Amounts received by employees pursuant to a Quebec regulation requiring construction contractors to pay a set amount per day to employees to cover the employees' cost of travelling between home and the work site are included in their income under s. 5(1), and are not allowances for travelling expenses within the meaning of s. 6(1)(b).
21 July 1992 Memorandum 921671 (March 1993 Access Letter, p. 64, ¶C5-184)
An allowance paid to employees paid by reference to their increased commuting distance resulting from an employer's relocation would be included in their income.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | 17 |
18 June 89 T.I. (Dec. 89 Access Letter, ¶1042)
Where the employers' practice was to provide a periodical lump sum payment for trips within a 16-kilometre radius from the employer's place of business, and to provide a reasonable allowance based on the distance travelled for trips outside this radius, the full amount of lump sum payment received with respect to travelling within the 16-kilometre radius was taxable under s. 6(1)(b).
Forms
Subparagraph 6(1)(b)(iii)
Administrative Policy
23 January 1992 Memorandum (Tax Window, No. 12, p. 9, ¶1571)
Foreign service employees of Canada who receive allowances in respect of vacation trips are not taxable on those allowances pursuant to s. 6(1)(b)(iii).
30 September 2011 Internal T.I. 2011-0393171I7 F - Representation or other special allowances
A member of the Canadian armed forces was assigned to the U.S. and occupied an apartment there for several years and did not maintain a residence in Canada. While in the U.S., and, while there, received a (i) rent allowance which paid him for the excess of his actual rent expense minus a deduction for the notional cost of accommodation in Canada, but without this deduction having been indexed over the years for inflation, (ii) a similar utilities allowance, and (iii) a Foreign Service Premium to compensate for other financial detriments of a foreign posting.
The Directorate first quoted a statement in 2005-0158871E5 that:
[A] "representation allowance" in the context of subparagraph 6(1)(b)(iii) … is an allowance paid to a worker having to work outside the country and is intended to lessen the inconveniences arising out of having to move abroad, being subject to different living conditions and, where applicable, having to face a higher cost of living.
The Directorate then concluded that the foreign service premium so qualified.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | no benefit for excess of rent allowance over cost of comparable Cdn location or where higher class of accommodation is for security reasons | 251 |
Subparagraph 6(1)(b)(v)
Cases
Hudema v. The Queen, 94 DTC 6287 (FCTD)
A taxpayer, who was employed in the selling of television advertising in Regina and the surrounding viewer area, received a weekly car allowance of $44 per week and was reimbursed for actual gas, oil, lubrication and parking expenses. His personal use of his car (which was the family's second car) ranged from 35% to 4% in the taxation years in question. In finding that the allowance was a reasonable allowance (with the result that the taxpayer was not entitled to claim any additional deductions under s. 8(1)(f) or (h)), Strayer J. stated (p. 6290):
"He did not demonstrate that it was sensible to make such little personal use of the car he used for his work. Put another way, he did not demonstrate that it was unreasonable for his employer to expect him to use his vehicle in an efficient way, with the allowance being expected only to pay for such incremental use of his car as his work required."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(f) | 133 |
The Queen v. Eggert, 85 DTC 5522, [1985] 2 CTC 343 (FCTD)
Counsel for the taxpayer unsuccessfully argued that "period" can import the whole taxation year so long as any selling occurred at any time in the taxation year.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii) | 30 | |
| Tax Topics - Statutory Interpretation - Punctuation | 18 |
Administrative Policy
S2-F3-C2 - Benefits and Allowances Received from Employment
Reasonable travel allowance
2.63 ...In general, expenses normally incurred while travelling from one place to another, including food, accommodation, and incidentals, are considered travel expenses.
2.64 ...[A]n allowance that approximates the reasonable out-of-pocket expenses the employee will incur while travelling for work is generally considered reasonable.
88 C.R. - F.Q.29
An employee who receives an allowance that is less than a reasonable amount and to which s. 6(1)(b)(v) otherwise applies would be required to include the allowance in income and would be able to deduct any deductible expenses under s. 8.
Subparagraph 6(1)(b)(vii)
Cases
The Queen v. Eggert, 85 DTC 5522, [1985] 2 CTC 343 (FCTD)
Since the taxpayer received a fixed monthly travel allowance that did not vary in accordance with the number of days he spent on the road, the allowance constituted employment income.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(v) | 27 | |
| Tax Topics - Statutory Interpretation - Punctuation | 18 |
The Queen v. Paradis, 86 DTC 6029, [1985] 2 CTC 3 (FCTD)
A game warden received a set meal allowance from his employer of $2,500 which was calculated without regard to his travel time, and accordingly was not exempted under s. 6(1)(b)(vii).
The Queen v. Cival, 83 DTC 5168, [1983] CTC 153 (FCA)
It was suggested obiter that mileage reimbursements would not be an "allowance".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h) - Subparagraph 8(1)(h)(ii) | 51 |
The Queen v. Lavers, 78 D.T.C 6230, [1978] CTC 341 (FCTD)
An employee who received a fixed allowance of $87 a month plus a mileage allowance of 9.8¢ per mile in respect of his car which he was required to use as a condition of his employment, was taxable on the monthly allowance. The monthly allowance was designed to compensate for fixed automobile costs and was not computed by reference to time actually spent by the taxpayer.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 172 - Subsection 172(1) | 35 |
See Also
Morissette v. The Queen, 2013 DTC 1002 [at 21], 2012 TCC 37 (Informal Procedure)
CRA issued a directive stating that meal allowances of over $17 per meal would be considered unreasonable, and on that basis the taxpayer's employer treated his $20 meal allowances as a taxable benefit.
In allowing the taxpayer's appeal, Tardif J. found that:
- the $17 threshold was arbitrary and unsubstantiated, and therefore there was no basis to conclude that $20 was unreasonable; and
- whether an employer treats a benefit as a taxable benefit is ultimately irrelevant to its proper tax treatment, "particularly if it is the product of a superficial and arbitrary analysis" (para. 7).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | 89 |
Sénéchal v. The Queen, 2011 DTC 1357 [at 1997], 2011 TCC 365 (Informal Procedure)
The taxpayers were police union representatives. Lamarre J. affirmed the Minister's position that reimbursement from the union for meals were a taxable allowance rather than an excluded expense reimbursement because the union paid a fixed amount for each meal, irrespective of actual cost (para. 33). He also stated (at para. 34):
[T]he meal allowances that were included in the appellants' income were paid in connection with the appellants' performance of their duties within the municipality of Saguenay. Even though that municipality results from a merger of three former cities, the meals eaten within it cannot, in my view, be considered to have been eaten away from the municipality where the employer's establishment was located, or away from the metropolitan area where it was located.
Administrative Policy
15 November 2016 Internal T.I. 2015-0577201I7 F - Employés du transport
A trucking company pays its employed long-haul drivers allowances for accommodation expenses of $0.04 per kilometer (scenarios 1 and 3) or of $75 per day spent away (scenario 2). (In scenario 3, they also receive wages of $0.36 per kilometre.) The employees each sleep in the truck’s cab as a security measure, so that no expenses are generally incurred by them for accommodation – but their meal expenses, amounting to around $40 per day, are approximately twice the allowance amounts in scenarios 1 and 3 based inter alia on assumptions as to the number of kilometres travelled. Would the allowances received be considered as reasonable and, therefore, excluded from employment income under s. 6(1)(b)(vii)? CRA responded:
[T]ravel expenses include food, beverage and accommodation costs. In addition… the costs of showers are also considered to be deductible as accommodation expenses where a transport employee sleeps in the cab of the truck rather than in a hotel. …
[A]n allowance for accommodation expenses calculated exclusively on the basis of distance, time or other criteria will not be considered reasonable if it does not represent an estimate of the cost of accommodation that may be incurred by the employee during the travel that generated entitlement to the allowance. …
[W]here an employee sleeps in the truck cab, it is unlikely that the allowances for accommodation expenses in the three scenarios provided will be considered reasonable for the purposes of paragraph 6(1)(b).
IT-272R "Automobile and Other Travelling Expenses - Employees"
Where RC considers a travelling allowance claimed to be reasonably high and the employee is unable to provide acceptable evidence to show that the allowance was reasonable, the excess will be included in his income.
Subparagraph 6(1)(b)(vii.1)
Cases
Daniels v. Canada (Attorney General), 2004 DTC 6276, 2004 FCA 125
The Court rejected the taxpayer's submission that as a councillor with the County of Newell in Alberta, his place of business was the whole of the applicable County Division and found that an allowance received by him for travel between his home and the place of Council meetings was taxable on the basis of jurisprudence establishing that travel expenses incurred by a taxpayer in travelling to and from his home to his place of work are considered personal expenses.
See Also
Sénéchal v. The Queen, 2011 DTC 1357 [at 1997], 2011 TCC 365 (Informal Procedure)
The taxpayers were police union representatives. Lamarre J. affirmed the Minister's position that taxpayers' reimbursement from the union for motor vehicle expenses were to be included in income. Evidence suggested that a significant portion of the reimbursement pertained to travel from the taxpayers' homes. Moreover, the purported monthly distances driven tended to be round numbers like 100 or 400 kilometers. Lamarre J. concluded that the taxpayers' evidence was insufficient to establish that the reimbursement was a reasonable allowance for motor vehicle expenses.
Veinot v. The Queen, 2010 DTC 1097 [at 3017], 2010 TCC 112 (Informal Procedure)
The taxpayer, who was employed as a forestry equipment operator, was required to travel to various remote logging sites with a forestry vehicle. His employer paid an allowance, but disallowed the first 50 kilometers of each trip on the basis that the taxpayer was assumed to head to the employer's office first (a personal expense), and from there to the logging site. Woods J. found at paras. 16-18 that no portion of the drive to the site was a personal expense. The general principle, that travel from home to work is a personal expense, is typically confined to cases where the taxpayer's destination is a regular place of business.
Woods J. found at paras. 20-22 that the allowance could not be excluded from income under s. 6(1)(b)(vii.1), because it was not a "reasonable allowance." The allowance was not calculated solely on the basis of kilometers but included other factors such as which equipment was being transported. Moreover, the allowance was not intended to reimburse all employment-related costs, but only to provide some assistance. However, because the allowance was not reasonable, s. 8(1)(h.1)(iii) did not apply and the taxpayer was entitled to deduct his motor vehicle travel expenses.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h.1) | 198 |
Campbell v. The Queen, 2003 DTC 420, 2003 TCC 160 (TCC) (Informal Procedure)
Travel allowances (calculated on a per-kilometre basis) received by the taxpayers in respect of their mandatory attendance at School Board meetings in connection with their duties of employment were not includable in their income given that they maintained offices in their homes, so that when they went from their home offices to the School Board premises they were engaged in carrying out their duties of a School Board member.
Administrative Policy
2 February 2017 Quebec CPA Individual Taxation Roundtable Q. 1.5, 2016-0674801C6 F - Allocation et frais d'une automobile
Can an employer pay an allowance to an employee using the most favorable of the following three methods: the travel allowance set by the Treasury Board ($0.49 per km. of Quebec travel as of July 1, 2016); the Reg. 7306 rate of $0.54 per km for the first 5,000 km and $0.48 per km for the excess; and the employee’s actual out-of-pocket expenses? Do the same principles apply to an electric car? CRA responded:
[T]o establish that a per-kilometer rate is reasonable, the following could be taken into account: the type of vehicle, the road conditions, and the cost of gasoline or the electricity rate at the specific venue. …
Generally, the CRA considers a rate based on kilometerage to be reasonable if it corresponds to the rate prescribed under ITR section 7306…[provided the] employee pays all expenses related to the motor vehicle. However, a rate different from that prescribed may be considered reasonable in light of the particular facts of a situation. …
[T]he CRA does not have a specific policy on per-kilometre allowances for an electric motor vehicle.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(k) - Subparagraph 6(1)(k)(v) | electric vehicles treated the same | 56 |
19 December 2012 External T.I. 2012-0463581E5 F - Allocation pour l'usage d'un véhicule
In the performance of her duties of employment as a home care attendant, the employee always drove her own car directly from her home to that of her first client, and drove from the home of her last client back home of her last client. Her clients were not the same over the course of the week, and varied over the years. Is such distance traveled at the beginning and end of each day carried out in the performance of her duties of her employment and, if so, would the allowance paid (within the Reg. 7306 limits) be excluded from her income where based solely on the number of kilometers traveled? CRA responded:
[T]he employee's motor vehicle trips in a day to go from her residence to the home of her first client and from the home of her last client to her residence may be considered as travel in the performance of the duties of an office or employment, provided that the homes of her clients do not constitute, for the employee, a regular place of employment. Based on the facts presented, it is unlikely that the clients' homes are a regular place of employment for the employee.
Furthermore, we generally consider the rates set out in section 7306 … to be reasonable for the purpose of calculating an allowance for the use of a motor vehicle referred to in paragraph 6(1)(b).
3 December 1993 T.I. 932457 (C.T.O. "Automobile Allowance, Less than Reasonable Amount?")
RC will consider an automobile allowance to be less than a reasonable amount (with the result that the employee is entitled to include the allowance in income and claim the related business expenses to the extent they are reasonable) where the employee's total expenses for business use in the year exceed the total allowances received in the year. The Department's position regarding what should be considered motor vehicle expenses is contained in IT-522, para. 3.
90 C.R. - Q3
An employee's automobile allowance is not reasonable where the employee's total expenses for business use in a year exceed the total allowance received in that year.
88 C.R. - "Automobile Rules" - Allowances to Employees"
An employee may not include in his income an allowance that is excluded by s. 6(1)(b), and then claim a deduction for his actual expenses.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(x) | 92 |
Subparagraph 6(1)(b)(x)
Administrative Policy
24 June 2016 Internal T.I. 2014-0555611I7 F - Allocation raisonnable
Did 2012-0460481E5 (which found that a fixed allowance of $4.60 for each trip made of less than 10 kilometres in the same day in running errands for the employer was deemed to be unreasonable by s. 6(1)(b)(x)) modify 2007-0228521I7 (which accepted the employer’s compensation policy of providing for a daily minimum payment where the number of kilometres traveled per employee was less than a specified number). In indicating no change, CRA stated (TaxInterpretations translation):
[A] minimum daily allowance based on the number of kilometres traveled should not have adverse tax consequences if it is representative of the actual use of a vehicle and is established to compensate an employee for expenses actually incurred for the use of the employee’s vehicle in the performance of duties of employment. This position is still in effect.
17 June 2013 External T.I. 2012-0465031E5 F - Paiements pour publicité sur un véhicule
A corporate employer, in addition to paying its employees an allowance for their use of their automobiles that is based solely on the number of kilometers traveled in performing their duties, calculated according to the limits in Reg. 7306, pays them an annual amount for their agreement to display the company's corporate logo and colours on their automobiles. CRA stated:
In general, we consider the rates set out in section 7306 of the Regulations to be reasonable for the purposes of computing an allowance for the use of a motor vehicle under paragraph 6(1)(b).
However, we are of the view that the fact that an employer pays a publicity amount to an employee could have the effect of deeming, in applying subparagraph 6(1)(b)(x), the allowance for the use of the motor vehicle to be unreasonable.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | taxable benefit from being paid to display company logo on car | 78 |
28 March 2013 External T.I. 2012-0460481E5 F - Allocation pour usage d'un véhicule à moteur
An employee could receive a fixed allowance of $4.60 for each trip made of less than 10 kilometres in the same day in running errands for the employer. CRA found that, for the purposes of s. 6(1)(b)(vii.1), the allowance was deemed by s. 6(1)(b)(x) not to be reasonable as it was not based on the number of kilometres traveled, so that it was includible in employment income.
22 June 2011 External T.I. 2010-0387391E5 F - Allocations pour véhicule à moteur
Employees of a construction company work, for between a day and a few weeks, at various worksites in the province that are not their employer's place of business. For “type 1” projects, the employer pays a travel allowance, for the employees travel by car between their home and the worksite, for kilometers traveled in excess of a threshold; and for “type 2” projects, there were two rates of per-kilometer allowance based on whether the kilometers travelled exceeded a threshold.
The CRA comments on type 1 projects were superseded by 2012-0454141C6 F. Respecting type 2 projects, CRA stated:
[T]he allowance is not reasonable since it is not based solely on the number of kilometers travelled by employees in fulfilling the duties of their employment. Those employees could therefore deduct all expenses incurred to travel from their place of residence to the worksites to which they are assigned. In fact, for the portion of their travel exceeding XXXXXXXX, the allowance paid for the travel exceeding XXXXXXXXXX would be deemed not to be reasonable, whereas the portion of their travel that is less than XXXXXXXXXX would not entitle them to an allowance.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h.1) | employees entitled to s. 8(1)(h.1) deduction where they received an allowance that was taxable under s. 6(1)(b)(x) | 153 |
7 May 2007 Internal T.I. 7 May 2007 Internal T.I. 2007-02285217 - Allocation pour frais de déplacement
The employer’s compensation policy provided for a daily minimum payment where the number of kilometres traveled per employee was less than a specified number. CRA concluded that such allowance for the use of a motor vehicle was not deemed to be unreasonable by s. 6(1)(b)(x) as it was based solely on the number of kilometres traveled.
2 May 1990 T.I. (October 1990 Access Letter, ¶1448)
Where an employee receives a fixed car allowance of $10 a month and an allowance of 21¢ per kilometre, the per-kilometre allowance will not have to be included in the taxpayer's income despite the fact that both allowances were paid for the same use of the motor vehicle, provided that the lump sum payment is a separate allowance from the per-kilometre allowance.
88 C.R. - "Automobile Rules" - Allowances to Employees"
Flat monthly payments or advances that are based on an estimate of business kilometres to be driven with an agreement for a year-end adjustment based on the actual business kilometres driven, will satisfy the requirement in s. 6(1)(b)(x).
- A car allowance generally (but not always) will be considered reasonable if it does not exceed the 27 cents/21 cents amount.
- For 1988, where records are not available to substantiate the computation of a per kilometre allowance, RC is prepared to consider such other substantiation of the reasonableness of the allowance as may be available.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii.1) | 25 |
Subparagraph 6(1)(b)(xi)
Administrative Policy
8 February 1994 Memorandum 940065 (C.T.O. "Employment Expenses")
"A reimbursement is usually considered as a repayment of an expense actually incurred and an allowance implies an amount paid in respect of some possible expense without any obligation to account for any actual expense." Given this distinction, the phrase, "reimbursed in whole or in part" in s. 6(1)(b)(xi) would not include flat rate allowances.
October 1989 Revenue Canada Round Table - Q1 (Jan. 90 Access Letter, ¶1075)
Where the employer paid a yearly lump sum for trips within a 20-kilometre radius of the employer's place of business, and a reasonable allowance based on the distance travelled for trips outside this radius, the lump-sum allowance was taxable, but because the lump-sum allowance could not be considered as a reimbursement in whole or in part of expenses, the second allowance would not be taxable.
88 C.R. - F.Q.26
Where the employer provides an automobile allowance to an employee but is also billed directly for a portion of the automobile expense the allowance will be considered to be reasonable if it is calculated on a per kilometre basis and is only related to the costs actually paid by the employee.
Paragraph 6(1)(c) - Director’s or other fees
Administrative Policy
17 December 2012 External T.I. 2012-0458071E5 - Per Diem Fees
Per diem judges and per diem justices of the peace, who are former full-time judges and former full-time or part-time justices of the peace, are paid a fixed rate per day of work, and are not provided with an office space, office supplies or secretarial/administrative assistance. In finding that such receipts are taxable under s. 6(1)(c), CRA stated that the:
case law on the subject...specifies that a legal entitlement to a per diem rate of remuneration established in advance is sufficiently "fixed or ascertainable" to meet the definition of an "office".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Office | 90 |
15 February 1994 T.I. 933686 (C.T.O. "Waived Conference Fees")
Where a non-profit corporation holds an annual conference each year in a selected Canadian city and asks each of its directors to attend the conference free of charge, the waived conference fee will not be considered to be in the nature of a director's fee if the main purpose in requesting the directors' attendance was to further the aims and objectives of the corporation.
Paragraph 6(1)(e) - Standby charge for automobile
Cases
Babich v. Canada, 2013 DTC 5010 [at 5556], 2012 FCA 276, aff'g 2010 TCC 352
The taxpayer ("Babich") was the sole shareholder of a corporation ("Able") which provided a car exclusively for use (both personal and business) by Babich's mother and by his father, who was the corporation's general manage. V.A. Miller J. stated (at TCC para 22):
I conclude from all of the evidence that a benefit was conferred on Babich. The Automobile was owned by Able and all expenses were paid by Able. Babich was the sole shareholder of Able and he allowed his parents to have exclusive use of the Automobile for both personal and business purposes. According to subsection 15(5), the value of the benefit to be included in a shareholder's income with respect to an automobile relates to an automobile made available to the shareholder or to a person related to the shareholder.
Sharlow J.A. dismissed the taxpayer's contention that the benefit should have been taxed in the hands of his parents pursuant to s. 6, rather than in his hands under s. 15(1). The Court was satisfied that the trial judge's decision was "correct in law and is consistent with the evidence presented to her" (FCA para. 11).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | shareholder rather than employee benefit | 186 |
Canada v. Adams, 98 DTC 6266 (FCA)
The taxpayers were car salesmen who leased automobiles from the dealership, were required to ensure that the vehicles were on the premises of the dealership during normal business hours and free of personal items, and otherwise could use the automobiles as they wished. In overturning a finding of the Tax Court that in these circumstances s. 6(1)(e) did not apply because the taxpayers did not have "unrestricted use" of the automobiles, Robertson J.A. found (at p. 6270) in light of the broad language of s. 6(1)(e) and its legislative history that "the purpose for which the employer's automobile was made available is not a relevant consideration".
Bouchard v. The Queen, 83 DTC 5193, [1983] CTC 173 (FCTD)
A company's Rolls Royce which it made available to its President and chief shareholder ("Bouchard") was found to have been used 90% of the time by Bouchard for the company's business, including such functions as the inspection and supervision of retail outlets, visits to customers and the delivery of bearings in emergency situations. Since the personal use was thus incidental, the pre-1983 version of S.6(1)(e) did not apply.
The Queen v. Harman, 80 DTC 6052, [1980] CTC 83 (FCA)
It was held under the pre-1983 version of S.6(1)(e) that an employee's "employer made an automobile available to him in the year for his personal use" where the facts establsihed "that the employer provided an automobile necessary for and predominantly for the use of the employee in his employer's business, and although the employee had permission to use it for personal purposes the opportunity to do so was minimal."
See Also
Potvin v. The Queen, 2008 DTC 4813, 2008 TCC 319 (Informal Procedure)
The provision of a truck to the taxpayer's husband by a corporation of which she was the sole shareholder and he the principal employee was found to be a benefit to her under s. 15(1) (as assessed by the Minister) rather than under s. 6(1)(e) given that the work performed by him in the year in question was negligible (the corporation had largely ceased operations). Accordingly, the benefit was conferred on her husband by reason of her shareholding rather than by reason of his employment.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) | negligible work - therefore shareholder benefit | 84 |
MacMillan v. The Queen, 2005 DTC 1243, 2005 TCC 583 (Informal Procedure)
The taxpayer (a vehicle fleet maintenance manager) was required by his employer (B.C. Hydro) to keep a dedicated Hydro van at home during hours that he was not working in order that he could be called out on emergencies. He was prohibited from using the van other than for commuting to and from work and in connection with the performance of his duties.
In these circumstances, the van had not been "made available" to him.
Administrative Policy
23 February 2012 External T.I. 2011-0423461E5 F - Automobiles de collection
A corporation ("Autoco") with an individual as its sole shareholder, director and officer owns collector automobiles for its investment purposes. The individual uses the automobiles exclusively in order to go to collector automobile shows, to perform automobile maintenance or to avoid damage to the mechanical parts of these automobiles that may occur when they do not travel a minimum number of kilometers per year. In discussing whether there is a taxable benefit, CRA stated:
Where an automobile, collector or otherwise, is made available to an individual in the capacity of employee and the employee uses it in part for personal purposes, a taxable benefit under paragraph 6(1)(e), in the form of a reasonable standby charge, must generally be included in the employee’s income. In addition, if an amount is paid or payable in respect of the operation of the automobile related to the individual’s personal use, the individual must include a taxable benefit in that individual capacity under paragraph 6(1)(k). …
Where a person is both a shareholder and an employee of a corporation and receives a benefit from that corporation, the Canada Revenue Agency generally considers that there is a presumption that the person benefited from that benefit as a shareholder where that person exercises significant influence over the conduct of the affairs of the corporation. However, where a similar benefit is offered by the corporation to all of its employees, including those who are also shareholders, the latter are usually considered to have received a benefit by reason of their employment.
7 October 2016 APFF Roundtable Q. 5, 2016-0652861C6 F - Véhicules électriques - rabais
Respecting where an electric vehicle used for business purposes or in the course of employment is charged at home and there is no electricity meter specific to the vehicle, CRA referenced use of the per-kilometre electricity standard provided by the manufacturer in determining the annual electricity cost, stating:
[T]he establishment of an average per-kilometer energy cost could be a reasonable method. In such a situation, the taxpayer would also need to take into account the use of pay-charging stations or free charging stations in establishing those costs.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A | installation cost included | 31 |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(2) | Quebec government assistance does not reduce cost of purchased vehicle, but treated as compensation to dealer-lessor prorated over term of lease | 249 |
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(g) | vehicle assistance paid indirectly (to dealer) covered | 225 |
| Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A | cost not reduced under general principles by government assistance | 137 |
7 September 2012 Internal T.I. 2012-0434341I7 - Taxable benefit chauffeur of employer-provided car
In discussing whether there is a taxable benefit to the driver of an executive's employer-provided automobile, CRA noted that it was its long-standing position "that travel between employees homes and their regular place of employment (RPE) is personal travel," and then commented:
Where a driver picks up and drops off an executive at his or her residence on a regular basis, it is the CRAs view that the executives residence is a RPE for the driver. Travel between the drivers home and the executives residence would therefore be personal travel for the driver....However, if the driver only occasionally drives the executive to his or her residence, then the executives residence will not be a RPE for the driver providing there are various times and locations for the daily pick-up and drop-off of the executive.
November 1991 Memorandum (Tax Window, No. 12, p. 7, ¶1568)
Where pick-up trucks are supplied by forest industry employers to employees for use in their work as well as for travel between home and work, the normal automobile rules apply.
2 November 89 Policy and Systems Branch Letter (May 1990 Access Letter, ¶1204)
The rules normally applicable to employer-provided vehicles also will apply to police and fire department cars.
89 C.R. - Q.48
An automobile will be considered to be available to the employee where: the employee is absent from the country on business and leaves the automobile at the airport parking lot; he is on holiday and leaves the automobile parked on the employer's premises; the automobile is being repaired at a garage; and he is ill or disabled.
IT-63R5 "Benefits, Including Stand-By Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992"
Articles
M. Tang, G. Katz, "Automobile Taxable Benefits and Expenses: Part 1", 1997 Canadian Tax Journal, Vol. 45, No. 5, p. 1150.
Summerville, "Stand-by Charge May Be Reduced by Leaving Company Car in Employer's Control", Taxation of Executive Compensation and Retirement, September 1990, p. 326.
Paragraph 6(1)(e.1) - Group sickness or accident insurance plans
Administrative Policy
12 June 2017 Internal T.I. 2016-0679291I7 F - Régime d’assurance décès et mutilation accidentels
The Employer requires accidental death and dismemberment coverage ("Insurance Coverage") for those of its employees traveling to high-risk areas ("Employees"), irrespective whether they have a personal policy that covers their death or disability while working in such an area. Without the Insurance Coverage, the Employees would refuse to work in those areas. Is the Insurance Coverage a taxable benefit?
After stating that s. 6(1)(e.1) “applies to premiums or contributions paid by an employer to a group sickness or accident insurance plan unless it relates to an income insurance benefit payable on a periodic basis (a non-lump sum),” CRA stated:
[A] plan by virtue of which a number of employees (two or more) are insured under a policy between the insurer and an employer is a group insurance plan.
… [T]he term "group … insurance plan”… includes, in particular, accidental death and dismemberment insurance plans. Therefore, if the Insurance Coverage is a group insurance plan, we are of the view that the total amounts paid by the Employer in respect of an employee during a year of Insurance Coverage is to be included in computing the employee's income from an office or employment under paragraph 6(1)(e.1).
… [T]hat the Insurance Coverage primarily benefits the Employer … is not relevant for the purposes of paragraph 6(1)(e.1).
29 April 2013 External T.I. 2013-0476131E5 F - Régime d'assurance-collective
In the context of a general discussion of the taxation of amounts related to a group insurance plan, CRA stated:
[U]nder subparagraph 6(1)(a)(i), the benefits that arise from the contributions that the employer pays, among other things, under a group insurance plan for illness or accidents and a group term life insurance policy are generally non-taxable. The term "group sickness or accident insurance plan" … includes accidental death and dismemberment insurance plans and disability and critical illness insurance plans.
However, notwithstanding the exception in subparagraph 6(1)(a)(i), an employee must include, under paragraph 6(1)(e.1), in computing the employee’s income from an office or employment, the total of all amounts contributed in the year in respect of the taxpayer by the taxpayer’s employer to a group sickness or accident insurance plan, except to the extent that the contributions are attributable to employment insurance benefits paid on a periodic basis pursuant to paragraph 6(1)(f), excluding subparagraph 6(1)(f)(v). …
In addition, despite the exception in subparagraph 6(1)(a)(i), subsection 6(4) could apply to confer a taxable benefit on an employee respecting premiums paid by the employee’s employer in respect of a group term life insurance policy calculated in accordance with the provisions of sections 2700 to 2704 of the Income Tax Regulations (the "Regulations").
Consequently, we are of the view that, to the extent that premiums paid by an employer (out of its own funds) relate to one or more plans listed in subparagraph 6(1)(a)(i), no taxable benefit shall be included in the calculation of an employee's employment income, subject to subsection 6(4) in respect of a group term life insurance policy and paragraph 6(1)(e.1) in respect of contributions that an employer pays, in certain circumstances, under a group illness or accident insurance plan.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(4) | general description of the s.6(4) exception to s. 6(1)(a)(i) | 152 |
IT-63R5 "Benefits, Including Stand-By Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992"
Paragraph 6(1)(f) - Employment insurance benefits
Commentary
S. 6(1)(f) provides for the inclusion in an employee's income of periodic amounts received under a sickness or accident insurance plan, disability insurance plan or income maintenance insurance plan that was funded by the employer. (Such amounts will still be taxable to the employee, even where the employee has made contributions to the plan, if the employer also has made any contribution to the plan - see Dagenais.)
Amounts may be considered to be "periodic" even though they are payable only during periods of illness or injury, their amounts depend on the most recent wage level of the employee and they may not be paid on time (Leonard). Under the surrogatum principle (i.e., the principle that a compensatory payment such as an award of damages has the same character as that which it is intended to compensate for), a lump sum received in settlement of a claim for periodic disability payments that were alleged to be owing to the taxpayer will itself be taxable under s. 6(1)(f) notwithstanding the lump sum character of the payment (Tsiaprailis).
Amounts received by the taxpayer may be taxable under s. 6(1)(f) notwithstanding that the disability may have subrogation rights to recover damages received by the taxpayer (see Harnish).
Cases
Tsiaprailis v. Canada, 2005 DTC 5119, 2005 SCC 8, [2005] 1 S.C.R. 113
The taxpayer received a lump sum payment of $105,000 in settlement of her claim for wrongful termination of her long-term disability benefits. Although the portion of the settlement that was in respect of future disability benefits was not paid "pursuant to" the plan because there was no obligation on the part of the insurer to make a lump sum payment under the terms of the plan, under the surrogatum principle, the portion of the lump sum payment that was intended to replace past disability payments was taxable to her under s. 6(1)(f).
Leonard v. The Queen, 96 DTC 6518 (FCTD)
The collective agreement between the taxpayer's union and his employer called upon the employer to pay premiums to an insurance company for weekly indemnities payable to employees in case of sickness or injury. Payments received by the taxpayer under this plan were includable in his income. Joyal J. indicated that payments could be "periodic" notwithstanding that they were payable only during periods of illness or injury (as opposed to being payable during fixed periods of time), that their actual amounts would depend on the current wage levels of the employee, and that they were not paid on time.
Dagenais v. The Queen, 95 DTC 5318 (FCTD)
The taxpayer, who was a member of a trade union that had negotiated short-term weekly indemnity benefits and long-term disability benefits with his employer, was unable to establish that the benefit package was an employee-pay-all plan. In particular, although there was some suggestion the employees had accepted a lower hourly rate increase in order to gain improvements to the benefit package, no evidence was proffered with respect to any concise or exact amount which they had paid for the benefits package.
See Also
Watts v. The Queen, 2004 DTC 3111, 2004 TCC 535 (Informal Procedure)
Periodic disability payments received by the taxpayer under the Canada Pension Plan were not received in respect of a "disability insurance plan" and instead were taxable under s. 56(1)(a). Bowman, ACJ stated (at para. 18):
"Insurance is essentially a contractual arrangement between an insured and an insurer and involves an obligation by an insurer, upon payment of premiums, to pay an amount upon an event whose recurrence is in a certain period."
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 118.94 | 37 | |
| Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) | 71 |
Harnish v. The Queen, 2007 DTC 1317, 2007 TCC 546 (Informal Procedure)
Periodic payments received by the taxpayer under a long-term disability plan were income to him withstanding that he signed a subrogation agreement with the insurer in which he agreed to pay 75% of any net amounts he recovered from third parties as a result of the accident causing his inability to return to work, given that this requirement to repay funds was a condition subsequent and did not affect the character of the amounts received as income.
Fry v. The Queen, 2001 DTC 846 (TCC)
A lump-sum received by the taxpayer in settling a claim against her employer's group disability insurer in respect of a motor vehicle accident was not taxable under s. 6(1)(f) (given its lump sum character), nor was it taxable under s. 6(1)(a) given (p. 848) that "the subject matter of payment under an accident plan [was] dealt with under paragraph 6(1)(f)".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Specific v. General Provisions | 50 |
Cook v. The Queen, 95 DTC 853 (TCC)
A lump sum received by the taxpayer in settlement of an action that she had brought against Great-West Life Insurance Company for its denial of benefits under a disability benefits policy issued to her employer, was not taxable to her under s. 6(1)(f) because it was not payable on a "periodic basis".
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | 87 |
Administrative Policy
S2-F1-C1 - Health and Welfare Trusts
Employee contributions
1.38 Amounts included in income under paragraph 6(1)(f) may be reduced by the total amount of any contributions made by the employee to the particular plan before the end of the year, provided that these contributions have not already reduced the amount of benefits previously received by the employee.
Employee contributions
1.38
Amounts included in income under paragraph 6(1)(f) may be reduced by the total amount of any contributions made by the employee to the particular plan before the end of the year, provided that these contributions have not already reduced the amount of benefits previously received by the employee.
8 July 2013 Internal T.I. 2012-0470021I7 - Settlement of Future Benefits ASO Plan
CRA noted that an employer's group disability plan which was administered by an administrator (such as an insurance corporation) on an administrativee services only basis nonetheless would qualify as an insurance plan ("IP") (and a wage loss replacement plan ("WLRP")) for the purpose of paragraph 6(1)(f) of the Act, if it contained "an undertaking by one person to indemnify another person, for an agreed consideration, from a loss or liability in respect of an event, the happening of which is uncertain." When asked whether the "decision in Tsiaprailis, 2005 DTC 5119, would apply to characterize a payment made by the administrator to an employee in settlement of future periodic benefits under the disability plan as a capital receipt from the disposition of a right," CRA stated:
…where it is established that the ASO plan is an IP and therefore a WLRP, the decision of the SCC in Tsiaprailis would apply to characterize the amount of a settlement for future WLRP benefits as a capital receipt from the disposition of a right….
Subparagraph 39(1)(a)(iii)...would exclude the capital receipt from the disposition of an employee's right under an ASO plan, if the plan was an IP, from the employee's income.
However where an employee receives such a settlement amount under an employer's ASO plan that is not an IP, the amount would be included in the employee's income under subsection 5(1) or section 6….
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 39 - Subsection 39(1) - Paragraph 39(1)(a) - Subparagraph 39(1)(a)(ii) | 230 |
12 February 2013 Internal T.I. 2013-0475631I7 - Treatment of Settlement Amounts
It is contemplated that a lump sum would be paid to the individual plaintiffs in a class action suit in settlement of their allegation that monthly long-term disability benefits received by them should not have been reduced by monthly benefits under the Pension Act. Applying the surrogatum principle in Tsiaprailis, CRA found that this amount would be taxable and included in the recipient's employment income in the year received under s. 6(1)(f), although it would qualify for relief under s. 110.2(2).
22 November 2006 External T.I. 2006-0189441E5 - Change to employer paid disability plan
Where an employee-pay-all disability plan becomes a plan in which the employer makes 100% of the contributions, an employee in receipt of benefits at the time the plan is converted may continue to receive non-taxable benefits in such amount and for such length of time as may have been specified in the plan when benefits commenced. If an employee's benefits commence after the conversion, the benefits will be included in income under s. 6(1)(f) and, given that such conversion results in a new plan, contributions made by the employee to the prior plan cannot be deducted from benefits received from the new plan.
31 July 2002 External T.I. 2002-014533
For a disability insurance plan to be an employee-pay-all plan, the employees must be legally responsible for paying all the premiums, notwithstanding that the employer may withhold the premiums from the employees' wages and remit them on behalf of the employees.
3 November 2000 External T.I. 2000-005068
The existence of an employee-paid-all plan is not determined by looking at the manner in which payments are made or reported, but rather is determined by ascertaining who is contractually obligated to pay the premiums. If the legal obligation for paying the disability plan premiums is split 50-50 between the employer and the employee, an employee would be subject to tax on any benefits received under the plan under s. 6(1)(f) to the extent that they exceed the deduction under s. 6(1)(f)(v) in respect of employee contributions.
5 July 1995 T.I. 950703 (C.T.O. "Disability Plans with Employee Pay Option")
An employee pay-all plan can be considered to exist separate from a plan to which the employer contributes even if the plans are co-ordinated to ensure that disability income does not exceed a stipulated percentage of pre-disability income.
22 June 1994 T.I. 940981 (C.T.O. "Wage Loss Replacement Plans")
Where the employer makes all contributions to one long term disability plan and it is intended that the employees will make all the contributions to a second long term disability plan, the fact that the premium in the first year will be identical for a member of either plan would not, by itself, result in the existence of two plans. However, if in light of all the circumstances, the employer premiums paid to the insurance company in respect of the first plan should have been lower than the premiums for the second plan, the excess premiums paid by the employer would be regarded as a contribution made by the employer to the second plan.
9 June 1994 Memorandum 940594 (C.T.O. "Settlement of Damages")
Amounts received in settlement of an action relating to an entitlement to long-term disability benefits were viewed as being a settlement of the taxpayer's right to sue for damages and, accordingly, were not required to be included in income.
15 February 1994 T.I. 932983 (C.T.O. "Conversion of an Ltd Plan")
Where an individual with a degenerative disorder begins to receive L.T.D. benefits subsequent to the conversion of an employee-pay-all Ltd plan to a second plan under which the employer makes all contributions, the benefits likely will be taxable under s. 6(1)(f).
16 December 1993 T.I. 932039 (C.T.O. "Employee Pay all Accident Insurance Plans")
"The issue of whether or not an employee-pay-all plan exists is not determined by considering who paid the related premiums. Rather, the question of whether an employee-pay-all plan exists depends upon whether the plan itself places upon the employees the legal obligation to pay 100% of the premiums ... Of course, where the employer can be regarded as having paid a part of an employee's Ltd premium that the employee is legally obligated to pay, that part must be treated in the manner of salary or wages received by the employee."
2 November 1992 T.I. 922363 (September 1993 Access Letter, p. 404, ¶C5-212)
Discussion of treatment of payments from the plan after the employer rather than the employees becomes required to make all contributions to the plan.
20 August 1992 Memorandum 922092 (April 1993 Access Letter, p. 130, ¶C5-190; Tax Window, No. 23, p. 21, ¶2159)
Benefits which arise subsequent to the conversion of a taxable plan to a non-taxable plan are included in income unless those benefits are in no way conditional on participation in the old plan.
18 February 1992, T.I. 913508 (March 1993 Access Letter, p. 65, ¶C5-185)
Discussion of a disability plan which includes a provision whereby the normal employee contributions to a registered pension plan will be funded by the disability plan in the event of disability.
14 February 1992 T.I. 193385 (January - February 1993 Access Letter, p. 7, ¶C5-182)
Discussion of various issues arising where an employer provides both taxable and non-taxable disability benefits to employees.
28 January 1992 Memorandum (Tax Window, No. 16, p. 17, ¶1723)
Where an individual receives a lump-sum payment pursuant to a consent to judgment of the Supreme Court of Ontario and as a result of a claim for coverage under a long-term disability plan in respect of injury in an automobile accident, the payment will be included in his income under s. 6(1)(f).
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 81 - Subsection 81(1) - Paragraph 81(1)(g.1) | 64 |
11 July 1991 Memorandum (Tax Window, No. 6, p. 11, ¶1349)
Re employee-pay-all plans.
8 May 1991 T.I. (Tax Window, No. 3, p. 28, ¶1246)
Where an employee is obliged to pay deficiencies under a wage loss replacement plan funded by employee premiums and is entitled to plan surpluses, any payments made by the employer to the plan, voluntary or otherwise, will constitute employer contributions, with the result that benefits received by the employees are taxable.
9 Aug. 89 T.I. (Jan. 90 Access Letter, ¶1076)
If the employer pays administration expenses, claim handling charges, legal expenses, actuarial fees or any other charges required in the establishment, operation, or winding-up of a group long term disability plan, then that plan will not qualify as an employee-pay-all plan for purposes of IT-428, para. 16.
Subparagraph 6(1)(f)(v)
Administrative Policy
19 July 2011 External T.I. 2010-0386411E5 F - Régime collectif d'assurance-salaire
Ms. X worked for ABC Inc. from 2000 to 2005, with her and her employer each annually contributing $1,500 to a group salary insurance plan (a "Plan"). From 2006 to 2010, Ms. X was employed by WXY Inc. (unconnected with ABC Inc.) and her employer and she each annually contributed $1,200 to a Plan (or $6,000 each in total). In 2010, Ms. X was ill and received $10,000 from the Plan. What is her income inclusion in 2010? CRA responded:
For the purpose of subclause 6(1)(f)(v), only the contributions made by the employee to the particular plan from which the benefits were received by the employee are deductible. As a result, if an employee changes employment and becomes a beneficiary under the new employer's plans, the employee cannot deduct the contributions the employee made in the previous employment from the benefits received from the new employer's plan.
In the situation you described, we believe that the sum of $4,000 will be required to be included in computing Ms. X's income for the year 2010.
Paragraph 6(1)(g) - Employee benefit plan benefits
Administrative Policy
3 July 2019 External T.I. 2018-0781941E5 - Foreign retirement plans (Ireland)
An Irish resident transferred the funds from a conventional Irish company pension plan to an Irish Personal Retirement Savings Account (PRSA) and, following taking up Canadian residence, will transfer the PRSA funds to an Irish Approved Retirement Fund (ARF). In finding that neither the PRSA nor the ARF qualified as a pension plan or an employee benefits plan, CRA stated:
If no employer contributions have been made to a foreign retirement plan, the plan will not be considered a pension plan, nor an EBP. In accordance with Abrahamson … the fact that the original source of funds in a foreign individual retirement plan was a pension plan is not relevant.
On this basis, withdrawals from the plan would not be taxable under s. 56(1)(a) as pension income or under s. 6(1)(g) as an EBP distribution. Instead, any income or capital gains generated under the plan would be taxable in Canada on a current, annual basis.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Superannuation or Pension Benefit | employer contributions to a predecessor fund are insufficient to give rise to superannuation or pension benefits | 176 |
88 C.R. Q.4
Interest income earned in a "money purchase" pension plan which was funded by an employer in respect of services rendered by an employee while a non-resident of Canada fall under s. 6(1)(g)(iii) when such interest forms part of a pension benefit, regardless whether the interest was earned while the taxpayer was resident in Canada.
Paragraph 6(1)(i)
Administrative Policy
2015 Ruling 2015-0601441R3 - XXXXXXXXXX Partnership - winding up
Current structure
Sub1 and Sub2 (both taxable Canadian corporations and wholly-owned subsidiaries of Parent) are currently the sole partners of a general partnership (“Partnership”). RSUs are granted to eligible employees and officers for their employment services. RSUs are settled through cash payments. An RSU liability is measured at fair value. DSUs enable the Board of Directors and certain key executives to elect to receive certain types of remuneration in deferred share units. DSUs are only exercisable upon death or retirement of the participant. DSUs are settled through cash payments. A DSU liability is measured at fair value. Sub1 was indebted to Partnership under the demand non-interest bearing “Sub1-Partnership Note”), and Parent was indebted to Partnership under the “Parent-Partnership Note,” which was interest bearing and payable on demand.
Proposed transactions
- Sub1 will repay the Sub1-Partnership Note by assuming Partnership’s accounts payable.
- Sub1 will assume all indebtedness of Partnership, including the Partnership-Parent Note and Partnership’s obligation to pay "Employee Accruals" under various compensation and retirement plans, including under the RSUs and DSUs in consideration for additional Partnership Units.
- Sub2 will transfer its interest in Partnership to Sub1 in consideration for Sub1 Preferred Shares and a non-interest bearing promissory note (the “Sub1 Note”), jointly electing under s. 85(1). As a consequence Partnership will cease to exist, Sub1 will become the sole owner of all the Partnership property and Sub1 will become subject to all the remaining obligations of Partnership, and immediately after the time that Partnership ceased to exist, Sub1 will carry on alone the business that was the business of Partnership.
Ruling
The fact that the obligations of Partnership under the Employee Unfunded Benefit Plans will become obligations of Sub1 as a consequence of Sub1 becoming the successor to Partnership’s business and successor employer to Partnership’s employees will not, in and of itself, result in a disposition of an employee’s rights under such Employee Unfunded Benefit Plans and a corresponding income inclusion for the employee.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 98 - Subsection 98(5) | 98(5) wind-up through s. 85 transfer of partnership interest of one partner to the other and preceded by debt assumptions | 272 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c) - Subparagraph 20(1)(c)(ii) | interest deductible following assumption of interest-bearing internal debt on s. 98(5) wind-up | 279 |
| Tax Topics - Income Tax Act - Section 34.2 - Subsection 34.2(11) | continuation of s. 34.2(11) reserve following partnership wind-up | 324 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(m) | continued availability of s. 20(1)(m) reserve following s. 98(5) wind-up | 266 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(n) | flow-through of s. 20(1)(n) reserve on s. 98(5) wind-up | 262 |
| Tax Topics - Income Tax Act - Section 20 - Subsection 20(24) | s. 20(24) election on s. 98(5) wind-up | 280 |
| Tax Topics - Income Tax Act - Section 18 - Subsection 18(9) | s. 18(9) deduction claimable by transferee former partner following s. 98(5) wind-up | 216 |
| Tax Topics - Income Tax Act - Section 147.2 - Subsection 147.2(8) | s. 147.2 continuity following s. 98(5) wind-up | 336 |
| Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangements - Paragraph (k) | no income on RSU/DSU assumption | 20 |
Paragraph 6(1)(k) - Automobile operating expense benefit
See Also
Szymczyk v. The Queen, 2014 TCC 380 (Informal Procedure)
The taxpayer's employer, General Motors of Canada Limited, assigned a new vehicle to the taxpayer and about 350 other senior managers or executives no less frequently than every three months for their personal and business use, but on the basis that they would identify shortcomings in the models and promote them to friends and acquaintances. The Minister authorized GM in 1982 to use a simplified method which treated the s. 6(1)(a) benefit from GMCL's payment of the vehicle operating costs as being equal to 50% of those costs.
Woods J upheld the Minister's reassessments of the taxpayer's 2008 and 2009 taxation years on the basis that the benefit under s. 6(1)(k) was equal to $0.24 per kilometer of personal use, which was assumed to be 20,004 kilometers per year. The enactment of s. 6(1)(k) in 1993 invalidated the 1982 authorization, and the taxpayer had not established any prima facie case as to the personal kilometers driven so as to displace the Minister's assumption on personal use. Furthermore, no designation to compute the benefit based on ½ the standby charge had been made in the relevant years as required in s. 6(1)(k).
See also summary under General Concepts - Estoppel.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - General Concepts - Estoppel | Minister's authorization should not be set aside too readily as being contrary to law | 317 |
| Tax Topics - General Concepts - Onus | Minister's "partly arbitrary" assumptions did not remove onus from taxpayer | 317 |
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(2) | separate personal use kilometers required for each vehicle used in year | 169 |
Administrative Policy
17 July 2019 External T.I. 2018-0777951E5 F - Avantage automobile
CRA indicated that where an individual had two employers, which were related corporations, and one of the two corporations acquired a car that it made available to Mr. X, which he was free to use for personal purposes but was also required to use in his work for both employers, that:
- A single benefit under each of ss. 6(1)(e) and 6(2), and under s. 6(1)(k), was to be computed.
- Each such single benefit was to be reported in a T4 slip issued by either employer (as they agreed) rather than being split between the T4 slips issued by both corporations.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(2) | where 2 related employers, only a single benefit under the formula is calculated for each automobile | 107 |
| Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(3) | where 2 related employer, ss. 6(1)(e) or (k) benefit can be reported by either employer | 168 |
14 September 2017 Roundtable, 2017-0703881C6 - CPA Alberta 2017 Q17: Electric Vehicle Taxable Benefits
A free charging station is provided at an employee’s home for a car used in performing employment duties. As the charging station draws on the employee’s electricity, the employee is reimbursing the employer for a portion of the operating costs. How should the operating expense be calculated? CRA responded:
[P]ersonal use of an employer-provided electric automobile (i.e., charging) will reduce the operating expense benefit determined under paragraph 6(1)(k) … where such costs can be established.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) | benefit from employer-provided charging station | 191 |
| Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h.1) | requirements for employee deduction of electricity costs for home vehicle charging station | 154 |
17 December 2013 Internal T.I. 2013-0510111I7 F - Automobile mise à la disposition d'un employé
A government employee reports to an office 1.5 days a week that serves as a place for preparing reports, meetings with the supervisor and receiving secretarial support. However, for 3.5 days per week, the employee travels to and from home and the office of a third party in another city. Is the latter travel of a personal nature? CRA responded:
[T]ravel by an employee between the employee’s residence and the employee’s workplace is not travel in the performance of the duties of an office or employment, and is travel of a personal nature. …
As a result, the concept of "workplace" is a key element in determining the nature of employee travel.
In this regard, the CRA considers that, in general, a workplace is any place where or from where an employee reports regularly or performs the duties of an office or employment. The CRA also is of the view that an employee may have more than one workplace. …
[T]he regularity and frequency of your visits to the [two] offices are indicators that these two locations could both qualify as “workplaces”.
5 October 2012 Roundtable, 2012-0454151C6 F - Registre des déplacements
Is an employer required to obtain an employee's travel logbook when providing the employee with a vehicle; and if such a record is not provided, how should the employer calculate taxable benefits? CRA responded:
The best way to determine that a vehicle is used for commercial or personal purposes is to keep an accurate record of all trips made for the whole year, including for each trip the date, destination, the reason for the travel and the distance traveled.
In general, it is expected that a person who uses a motor vehicle for commercial and personal purposes will maintain a record that objectively determines the use of that vehicle.
In the absence of such a record, an employer must demonstrate by other means how the employer determined the value of the benefit that the employee must include in computing the employee’s income.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 230 - Subsection 230(1) | no stipulated documentary requirement for kilometer log | 117 |
26 June 1995 Memorandum 950088 (C.T.O. "Automobile Expense Benefit")
Any amounts paid by an employee to a third party not related to the employer for the operating expenses of an employer-provided automobile will not reduce the operating expense benefit.
14 March 1995 T.I. 942891 (C.T.O. "Whether Travel Personal or Business")
"The Department's long standing position that travel between the home and workplace is personal in nature is not altered by the fact that an employer may require an employee to perform an employment-related function (such as an area patrol or a delivery or pick-up) during the course of the trip between the home and workplace. 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."
IT-63R5 "Benefits, Including Stand-By Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992"
Articles
Yull, "New Automobile Rules Call for a Review of Remuneration Strategy", Taxation of Executive Compensation and Retirement, March 1994, p. 883.
Subparagraph 6(1)(k)(v)
Administrative Policy
2 February 2017 Quebec CPA Individual Taxation Roundtable Q. 1.5, 2016-0674801C6 F - Allocation et frais d'une automobile
The computation of the operating expense benefit under s. 6(1)(k)(v) and Reg. 7305.1 is $0.26 per km traveled for personal use, where the employer assumes the operating expenses. Does this rate also apply to electric cars? CRA responded:
[T]he computation is the same regardless of the source of energy that powers the motor of the automobile.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii.1) | general reasonability of a car allowance rate of $0.54/$0.48 per kilometre including for electric vehicles | 174 |
Commentary
S. 6(1)(b) includes all amounts received by the taxpayer "as an allowance for personal or living expenses or as an allowance for any other purposes" in the taxpayer's income from an office or employment to the extent that such amounts are applicable to the office or employment. However, the amounts listed in ss. 6(1)(b)(i) to (ix) are not so included. Accordingly, in contrast to the reimbursement of an expense in circumstances where such reimbursement does not give rise to a taxable benefit under s. 6(1)(a), the full amount of an allowance received by an employee is included in the employee's income in the year of receipt, and the employee must then turn to s. 8 to determine whether any deductions can be claimed for expenses for which the allowance may have been intended to be compensation.
Amounts received by a taxpayer will be considered to be "allowances" if their amounts are fixed or determined in advance, they do not correspond to the actual amount of expenses incurred personally by the taxpayer, and the taxpayer has no obligation to account for the amounts received (Verdon, Bériault, Rio, Côté, MacDonald). However, a non-accountable allowance received by the taxpayer may not be taxable under s. 6(1)(b) if it is apparent that the personal expenses of the taxpayer for which the allowance is intended to be compensation are higher in amount than the allowance (Huffman).