Principal Issues: Are pick-up trucks provided by an employer "automobiles" as defined in subsection 248(1)?
Position: Question of fact.
Reasons: The law.
XXXXXXXXXX 2007-023863 Michael Cooke January 23, 2008
Dear XXXXXXXXXX :
Re: Definition of Automobile - Subsection 248(1) of the Income Tax Act (the "Act")
We are responding to XXXXXXXXXX electronic correspondence of May 31, 2007 concerning whether pick-up trucks provided by the XXXXXXXXXX (the "Company") to certain employees are "automobiles" as defined by subsection 248(1) of the Act. Since you have advised us that XXXXXXXXXX is no longer working for the Company we are responding to you on this matter.
In the correspondence XXXXXXXXXX indicated that the Company is a Crown corporation XXXXXXXXXX. We understand that the Company provides its owned or leased pick-up trucks to some of its employees for the purpose of carrying out their work-related activities in various locations throughout the province, XXXXXXXXX. Each pick-up truck is equipped with specific safety and other work-related equipment, XXXXXXXXXX. We understand that except for travel to the Company's office from home and back, the employees are not permitted to use these pick-up trucks for any other personal purpose. We understand that the Company's main source of income is derived from fees that the Company charges the XXXXXXXXXX and that the use of the Company's vehicles by these employees are essential to the income derived from its business operations.
The specific concern is whether the Company's pick-up trucks are being used to transport equipment in the course of earning income, such that these trucks would not fall within the definition of "automobiles" in the Act.
Our Comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to offer the following comments.
The value of the benefits derived by an employee from the availability and personal use of a motor vehicle supplied by an employer will depend, in part, on whether the particular motor vehicle in question is an "automobile" as defined under subsection 248(1) of the Act. Where a motor vehicle qualifies as an automobile, the Act requires the calculation of a standby charge and an operating expense benefit.
Certain vans, pick-up trucks or similar vehicles are excluded from the definition of "automobile" under subsection 248(1) of the Act depending on the particular use made of such motor vehicles. For example, subparagraph (e)(i) of the definition of automobile excludes such motor vehicles that have "...a seating capacity for not more than the driver and two passengers and that, in the taxation year in which it is acquired or leased, is used primarily for the transportation of goods or equipment in the course of gaining or producing income". Similarly, subparagraph (e)(ii) of the definition of automobile excludes such motor vehicles "...the use of which, in the taxation year in which it is acquired or leased, is all or substantially all for the transportation of goods, equipment or passengers in the course of gaining or producing income". In addition, subparagraph (e)(iii) of the definition of automobile will also exclude a pick-up truck that is used in the taxation year in which it is acquired or leased primarily for the transportation of goods, equipment or passengers in the course of earning or producing income at one or more locations in Canada that are, in respect of any of the occupants of the vehicle, a "special work site" or a "remote work location" as described in paragraph 6(6)(a) of the Act.
The determination of whether or not a particular pick-up truck owned or leased by an employer is considered to be an automobile as defined in subsection 248(1) of the Act remains a question of fact. Nevertheless, in our view, in the above-described situation, the transportation of the types of equipment to or from the various work locations would appear to be equipment that is being transported in the course of gaining or producing income. However, in determining whether a particular pick-up truck is used "principally" (i.e. more than 50%) or "all or substantially all" (i.e. 90% or more) for this purpose, other factors, such as the ratio of the "personal use" to the "business use" for each particular pick-up truck, would have to be considered. Please refer to paragraph 5 of IT-63R5, Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - after 1992, for the Canada Revenue Agency's views on what constitutes personal use of a motor vehicle.
Notwithstanding the above, as described in paragraph 23 of IT-63R5, even if a particular pick-up truck is not considered to be an automobile a taxable employment benefit related to the personal use of such a motor vehicle will nevertheless apply pursuant to paragraph 6(1)(a) of the Act.
We trust the above comments are of assistance.
Yours truly,
Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch