Principal Issues: In the situation described below, is there a standby charge benefit to be included in the income of employees who use an employer's car?
Position: Yes, for the personal use of the vehicle, represented by the journey between the employer's place of business and the employee's home.
Reasons: Income Tax Act. CRA's position
XXXXXXXXXX 2009-032308
March 15, 2010
Dear Madam,
Subject: Standby charge for an automobile
This is further to your email dated May 14, 2009, in which you requested our opinion regarding the taxable benefit to be included in the income of employees who use employer-owned automobiles. We apologize for the delay in responding to your question.
Unless otherwise indicated, all statutory references herein are to the provisions of the Income Tax Act (the "Act").
In particular, professionals from the XXXXXXXXXX Program (the "Program") of XXXXXXXXXX (the "Employer") are called upon, as part of their duties, to perform XXXXXXXXXX.
XXXXXXXXXX. Since these engagements are carried out early in the morning, employees are asked to leave their place of business with the automobile (as defined in subsection 248(1)) of the Employer on Friday evening after their shift in order to proceed directly to their homes. This allows them to avoid picking up the XXXXXXXXXX automobile at the Employer's office before going to the client's XXXXXXXXXX.
XXXXXXXXXX
Therefore, you wish to know if a taxable benefit is conferred on employees in the situations described above. If so, you wish to know how to calculate the benefit.
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5 of May 17, 2002, it is the practice of the Canada Revenue Agency not to issue written opinions on proposed transactions otherwise than by way of advance income tax rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope you will find useful. These comments, however, may not apply to your particular situation in certain circumstances.
Where an employer makes an automobile available to an employee and the employee uses the automobile for personal use, it is necessary to calculate a taxable standby charge benefit that will be included in the employee's income. Where such a benefit is included in computing an employee's income, a benefit related to the operation of the automobile must also be calculated.
For purposes of the standby charge benefit, personal use includes any use of the automobile by the employee or persons related to the employee for purposes other than in the course of employment. Personal use includes, but is not limited to:
- holiday trips;
- personal errands;
- travel between home and work (even if the employer requires the employee to use the automobile to return home).
There is no personal use where the employer requires or permits the employee to use the automobile to travel directly from the employee's home to a place other than the place of business to which the employee normally reports or to return to the employee's home from that place.
The formula to be used to calculate the standby charge benefit - where the employer owns the automobile that is available to the employee (instead of being the lessee under a lease agreement) - is as follows:
A/B x [2% x (C x D)]
where:
A is the number of kilometres driven by the automobile otherwise than in the performance of the duties of the taxpayer's office or employment;
B is the product of 1,667 times the number of days the automobile was available to the employee divided by 30;
C is the cost of the automobile to the employer;
D is the quotient obtained by dividing the number of days the employer owns the automobile that is made available to the employee by 30.
Where the distance travelled by the automobile during the number of days it is available to the employee is primarily in the performance of the duties of the office or employment -- and the employer requires the employee to use the automobile in the performance of those duties -- the standby charge benefit will be reduced.
Generally, an automobile is made available to an employee if the employee has access to or control of it. The employee ceases to have access to the vehicle when he or she hands over all the keys to the employer.
For purposes of the automobile operating benefit, where the employer pays the operating costs for the personal use of an automobile made available to the employee, the payment of those costs (including GST/HST and PST) is a taxable benefit to the employee.
Operating costs include:
- gas and oil;
- maintenance and repair costs, less any insurance proceeds;
- permits and insurance.
However, these expenses do not include interest, capital cost allowance for an employer-owned automobile, automobile lease costs, or parking fees.
If you assume responsibility for the operating expenses, you have to determine the operating cost benefit using either the optional or flat-rate calculation. For more information on these two methods of calculation, see the Employers' Guide, Taxable Benefits and Allowances.
In this case, there is no taxable benefit where an employee uses an Employer's automobile to drive from his or her home to the XXXXXXXXXX customer. Similarly, there is no taxable benefit when the employee leaves the client's place of business and returns directly to the home, without passing through the Employer's offices.
With respect to the use by an employee of the Employer's automobile for travel between the Employer's place of business and the employee's home, it is generally the CRA's position that such use represents personal use of the automobile that gives rise to a taxable benefit under the standby charge.
We hope the above comments will be useful.
Best regards,
François Bordeleau, Advocate
Manager
Business and Partnerships Section
Income Tax Rulings Directorate.