Principal Issues: [TaxInterpretations translation] Does an employee's use of an employer-provided vehicle in a particular situation result in a taxable benefit under paragraphs 6(1)(e) and 6(1)(k)?
Position: In the particular situation, yes.
Reasons: Where an employer's vehicle is made available to an employee and qualifies as an "automobile" as defined in subsection 248(1), an amount in respect of the personal use of the vehicle should be included in the employee's income under paragraphs 6(1)(e) and 6(1)(k).
XXXXXXXXXX 2010-036409 I. Landry, M. Fisc. August 6, 2010
Dear Sir,
Subject: Use of an employer-provided vehicle
This is in response to your letter of April 15, 2010, in which you asked us whether an employee's use of an employer-provided vehicle would result in a taxable benefit to that employee in the following hypothetical situation.
In your letter, you described a situation where certain employees of a corporation (the “Employer") are required, during the period during which they are on call, to use a vehicle of the Employer at all times, both for the trip between their residence and their regular place of work, and outside regular working hours for travel that is essentially of a personal nature. Such travel, however, is limited to an area surrounding their residence.
Such vehicles are clearly identified with the name and colours of the Employer. They are used to transport equipment necessary for the employee to perform job-related duties and to respond effectively to emergency calls. These vehicles would meet the definition of an "automobile" as described in subsection 248(1) of the Income Tax Act ("Act").
Unless otherwise indicated, all legislative references herein are to the provisions of the Act.
The situation you have indicated in your letter appears to be related to an actual situation involving specific taxpayers. As explained in Information Circular 70-6R5, Advance Income Tax Rulings, it is not the Directorate's practice to comment on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involves a specific taxpayer and a transaction, you should forward all relevant facts and documents to the appropriate Tax Services Office for its views. We are, however, prepared to provide the following general comments, which we hope you will find helpful.
Where an employer makes an automobile available to an employee, a taxable benefit must generally be computed for that employee. It is a long-standing position of the Canada Revenue Agency (the "CRA") that the use by an employee of an employer-provided vehicle for travel between the employee’s residence and the employee's regular place of work, as well as all travel not directly related to the employee's employment, is considered personal use, even if the vehicle is made available to the employee for the purpose of responding quickly to an emergency situation while the employee is on call. However, when an employee uses the vehicle from the employee’s residence to get to or from the place where there is an emergency other than the employee's regular place of work, the use of the vehicle will generally be considered to be related to the employee's employment.
The taxable benefit in respect of the personal use and availability of a motor vehicle that meets the definition of an automobile in subsection 248(1) is included in computing the employee's income under paragraph 6(1)(e) as a standby charge. In addition, the taxable benefit in respect of the automobile's operating expenses is included in the employee's income under paragraph 6(1)(k).
Full details on how to calculate the benefit from the use of an employer-provided vehicle are explained on pages 8 to 10 of T4130 Employers' Guide--Taxable Benefits and Allowances, which can be found at http://www.cra-arc.gc.ca/E/pub/tg/t4130/t4130-09e.pdf.
In Income Tax Technical News No. 40, dated June 11, 2009, the CRA announced changes to its administrative policy with respect to, among other things, an employer-supplied motor vehicle that the employee is required to take home at night. However, this new administrative policy applies only where certain conditions are satisfied, including where the vehicle does not meet the definition of "automobile" in subsection 248(1). The CRA's position remains unchanged for all other situations not covered by this new policy.
We hope that our comments are of assistance.
Best regards,
Randy Hewlett
Manager
for the Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.