Principal Issues: [TaxInterpretations translation] Does the use of employer-provided motor vehicles in the situations described above give rise to a taxable benefit to be included in the income of the employees using such vehicles? For the purposes of this analysis, do the vehicles provided by the employer to the employees meet the definition of automobile under subsection 248(1)?
Position: We would take the view - in light of the use to which they are put - that these vehicles are automobiles for the purposes of the Act. We are of the view that the two situations described would not result in a taxable benefit to be included in the employee's income.
Reasons: Since XXXXXXXXXX vehicles are designed and equipped with more than three seating positions and are not similar to a van or pickup truck. Subject to a review of all relevant facts, such travel (from the employee's residence) would be considered as travel related to the employee's work for the Employer.
December 9, 2010
XXXXXXXXXX Headquarters Businesses Division A. Dagenais Advocate, M. Fisc. B.A.A. 2010-037174
Automobiles made available to employees
This is further to your email of June 16, 2010 in which you requested our opinion on the above subject in specific contexts.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Background
You presented us with the situation of XXXXXXXXXX, which has a fleet of vehicles used in its day-to-day operations. A written agreement between the employer and the employee states that the personal use of XXXXXXXXXX's vehicles must be limited to all authorized direct travel between the employee's home and work (or vice versa). The agreement also stipulates that the use of the vehicles for other purposes is strictly prohibited subject to penalty.
The cars are clearly identified as XXXXXXXXXX (on the doors). The vehicle is not a van, pick-up truck or similar type. The vehicle has not been modified. The trunk and back seat are dedicated to carrying the equipment necessary for the employee to perform job-related duties, resulting in the vehicle being rendered XXXXXXXXXX .
You therefore wish to receive our comments on the following two situations:
First Situation
Occasionally, an employee whose usual place of work is in XXXXXXXXXX must travel to XXXXXXXXXX to attend a meeting. The employee has a public transit pass and normally travels by public transit to the employee's usual place of work. Since the meeting is scheduled early in the morning, the day before the meeting, the employee is invited to leave the regular place of work with the employer's automobile and proceed directly to the employee’s home located at XXXXXXXXXX. However, if the employee lives close to the employee’s usual place of work, the employee can take possession of the automobile on the morning of the meeting. For the employer, this saves time and money.
Second Situation
XXXXXXXXXX includes XXXXXXXXXX personnel who are called upon to perform XXXXXXXXXX with third parties. For these purposes, some XXXXXXXXXX are entrusted with a XXXXXXXXXX car in order to carry out their XXXXXXXXXX. They present themselves once a week to the regional office to which they report to take their assignment for the week. Thus, once their assignment has been received for the week, they go to an XXXXXXXXXX and then to an XXXXXXXXXX and finish at an XXXXXXXXXX before returning home. In order to carry out the tasks related to their employment, these XXXXXXXXXX are equipped with portable computers and printers as well as VPN keys and have all the necessary equipment in their car to carry out XXXXXXXXXX including XXXXXXXXXX. The XXXXXXXXXX bring their vehicle home in the evening for reasons of effectiveness, efficiency and/or because of the lack of available parking space paid by the employer.
For the purposes of this letter, we have assumed that the place of business of XXXXXXXXXX does not constitute a usual place of work for the employees of XXXXXXXXXX.
Questions
You inquired as to whether the use of motor vehicles provided by XXXXXXXXXX in the situations described above results in a taxable benefit to be included in the income of the employees using these vehicles.
As part of this analysis, you are asking us whether the vehicles provided by the employer to employees meet the definition of automobile under subsection 248(1).
Our Comments
For the purposes of the definition of automobile in subsection 248(1), an automobile is a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and 8 passengers, subject to the exceptions listed in paragraphs (a) to (d).
In determining whether the motor vehicles described in the facts are automobiles for the purposes of the Act, the question is the design of the motor vehicles, not their use. If the motor vehicles described in the facts are designed primarily to transport individuals on highways and streets, those motor vehicles are "automobiles" if the seating capacity does not exceed nine and the exceptions in paragraphs (a) to (d) of the definition "automobile" do not apply.
In both of the situations described above, since the vehicles in XXXXXXXXXX are designed and constructed with more than three seating positions and are not similar to a van or pick-up truck, we are of the view - based on their use - that those vehicles are automobiles for the purposes of the Act.
Where an employer-owned vehicle is made available to an employee, the personal use of the vehicle is a taxable benefit to be included in the employee's income. Where the vehicle is an automobile, this benefit is included in computing the employee's income under paragraph 6(1)(e) and is calculated under subsection 6(2) while the operating expense benefit is calculated under paragraph 6(1)(k).
Subsection 6(2) provides a formula for calculating the standby charge for an automobile based on the total number of days an employer made an automobile available to an employee during the period in the year that the employer owned or leased the automobile.
As stated in paragraph 5 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, the Canada Revenue Agency ("CRA") considers that an employee who uses the employee’s employer's automobile for travel between work and home uses it for personal purposes.
The determination of a location as the usual place of work for an employee is a question of fact that can only be resolved after a review of all relevant information and must be considered from the employee's perspective. Any place to which or from which the employee regularly reports or ordinarily performs the duties of the employee’s employment is considered the employee's usual place of work.
However, where an employee, at the employer's request or with the employer's permission, travels directly from the employee’s home to a place other than the employer's place of business where the employee is ordinarily required to report or to return to the employee’s home, it is considered that such travel is not for personal purposes.
That exception applies in particular if the employer provides the employee, on rare and irregular occasions, with a vehicle with which the employee returns to the employee’s home the day before a business trip and the next day (or vice versa), the employee travels from the employee’s home to attend, as the case may be, a meeting with an out-of-town client, a training course (away from the place of business) or a conference (away from the place of business).
First Situation
For the first situation, in light of the principles explained above, it is our view that the use of the motor vehicle by the employee - subject, of course, to an examination of all the relevant facts - would not give rise to a taxable benefit to be included in computing the employee's income.
Second Situation
For the second situation, we are of the view that there would be no taxable benefit to include in the employees' income since the employees use the vehicles either to travel from their regular place of work to the places of business of XXXXXXXXXX or directly from their home to the places of business of XXXXXXXXXX. Such travel would be considered work-related travel for the XXXXXXXXXX employee. Similarly, there is no taxable benefit where employees leave the place of business in XXXXXXXXXX and return home directly, without passing through the offices of XXXXXXXXXXX.
Access to Information
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should the taxpayer request a copy of this memorandum, they may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Ms. Celine Charbonneau at (819) 994-2898. In such cases, a copy will be sent to you for delivery to the taxpayer.
François Bordeleau, Advocate
Manager
Business and Partnerships Division
Income Tax Rulings Directorate.