12 November 1998 External T.I. 9823775 - AUTOMOBILE TAXABLE BENEFITS TO EMPLOYEES

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Auto - Taxable Benefits?

Position: Not under 6(1)(e) or 6(1)(k)- not automobiles, possibly under 6(1)(a).

Reasons: Definition in 248(1).

XXXXXXXXXX 982377
C. Tremblay
Attention: XXXXXXXXXX

November 12, 1998

Dear Sir:

Re: Automobile Taxable Benefit to Employees

This is in reply to your letter of September 10, 1998 requesting our opinion concerning a specific situation described therein.

In the situation described, two or three staff persons are “on call” to cover emergency situations as they arise during non-business hours. When (and only when) they are “on call”, they take a company vehicle home from the work location. If they are called during the night, they take the vehicle either directly to the job, or back to the operations center to pick up material and/or the appropriate work equipment. The next morning, they drive the vehicle back to work. If they are not “on call”, they drive their own vehicle to and from work. The vehicles used by the linemen are 1/2 ton pick-up trucks with a single bench seat and maximum seating for three people. The customer service technician uses a work van with a maximum seating for two people. You also requested our views on the income tax implications of using a pick-up truck with an extended cab or a sport utility vehicle that has seating for five for “on-call” use.

Our Comments:

The situations that are described appear to involve a series of actual completed or ongoing transactions involving specific taxpayers; consequently, your questions should be directed to your local taxation services office, which has the responsibility of determining the tax consequences of completed transactions and their implications to specific taxpayers. Although we are unable to provide an opinion in respect of the specific transactions described in your letter, we have set out some general comments which may be of some assistance.

The value of the benefit derived by an employee from the personal use and availability of an automobile supplied by an employer is required to be included in calculating the employee’s income. This value is an amount equal to a prescribed amount per kilometre for operating costs in connection with personal use and a “reasonable standby charge” (plus the equivalent to the Goods and Services Tax (GST) on the standby charge). In general, this standby charge is 2% per month of the cost of the automobile, or 2/3 of the lease costs calculated with reference to the number of days the automobile was available to the employee or to a person related to the employee. However, this standby charge may be reduced when the personal use is less than 1,000 kilometres a month and the business use portion of the total kilometres travelled is 90% or more. Further, provided the automobile is used primarily for business purposes, an amount equal to one-half of the standby charge benefit may be used as the amount of the operating costs benefit in lieu of the 14( per kilometre calculation.

Automobiles are defined under paragraph 248(1) of the Income Tax Act (the “Act”). This meaning is discussed in paragraph 2 of Interpretation Bulletin, IT-63R5, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992, a copy of which is enclosed. According to this paragraph, a pick-up truck that has a seating capacity for not more than a driver and 2 passengers and is used primarily for the transportation of goods or equipment is not considered an automobile. However, a pick-up truck with an extended cab and a sport utility vehicle with seating capacity for five would meet the definition of an automobile.

If the motor vehicles being provided are not automobiles, the provisions of the Act that are specific to employer-provided automobiles, i.e., the standby charge (paragraph 6(1)(e) of the Act) and the operating expense benefit (paragraph 6(1)(k) of the Act), would not be applicable. Instead, an employee benefit in respect of such a vehicle would be included in income under the general provisions of paragraph 6(1)(a) of the Act. In this regard, refer to paragraph 23 of Interpretation Bulletin IT-63R5.

The Department takes the position, which is supported by the courts, that travel between an employee’s residence and his or her regular place of work is personal. An individual’s regular place of work is considered to be the place where the individual reports for work. This applies whether or not an automobile is made available to an employee, who is “on call”. An exception occurs, however, where (as required by the employer or with the employer’s permission) the employee proceeds directly from home to a point of call other than the employer’s place of business to which the employee reports regularly (e.g. to make repairs at customers’ premises), or returns home from such a point. Further, once an automobile has been made available to an employee, the employee is subject to the standby charge for each day that he or she has access to, or control over, the automobile. Access is considered to end when an employee returns the keys of the automobile to the employer.

We trust our comments will be of assistance to you.

Yours truly,

J. Gibbons, CGA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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