Principal Issues: [TaxInterpretations translation] Is an employer required to obtain an employee's travel logbook when providing a vehicle to employees?
Position: We are of the view that the best way to determine the personal use of a vehicle is to keep an accurate record of all trips for the entire year.
Reasons: Longstanding position.
FEDERAL TAX ROUNDTABLE 5 OCTOBER 2012
2012 APFF CONFERENCE
Question 21
Travel logbook
Where an employer places a car at the disposal of an employee and bears the costs, the employer must calculate two taxable benefits for that employee. The first benefit, relating to the operation of the automobile, is calculated by multiplying a prescribed amount ($ 0.26 in 2012) by the number of kilometers traveled for personal purposes (footnote 1). The second benefit, relating to the use of the automobile, can be reduced if the distance traveled by the automobile is primarily in the performance of the duties of the employment (footnote 2).
We note that the employer's calculation is dependent on critical information from the employee: the number of kilometers traveled by the automobile for personal purposes and in the performance of the duties of employment. Keeping a record of the kilometers traveled by the employee appears to be the best way for the employer to properly calculate the taxable benefits associated with the use of an automobile. Under the Act, however, there is no specific obligation for the employee to provide such a record to the employee’s employer. We would note that the Quebec Taxation Act requires an employee to provide such a register to the employee’s employer, on pain of incurring a penalty.
Despite the silence of the Act, the maintenance of records was recommended by several participants in the tax field. To begin with, the courts have generally determined that keeping a logbook is the best way to demonstrate the kilometers traveled. Furthermore, in the "Automobile and motor vehicle benefits" section of the CRA website, it is stated that the employer and the employee must keep a record of how the vehicle is used to distinguish between kilometers traveled for personal or business purposes. Finally, in a technical interpretation (footnote 3), the CRA notes that the employer must make all reasonable efforts to ensure that the employee keeps a record of the kilometers traveled. The CRA referred to subsection 230(1) which requires that every person who is required to collect taxes must keep records and books of account which will enable the taxes payable to be determined. Since the employer must withhold tax at source under subsection 153(1) and it is subject to interest and penalties if it does not do so, the CRA is therefore of the view that it must obtain a record of the kilometers traveled.
Questions to the CRA:
(a) Is the CRA still of the view that an employer is required to obtain an employee's travel logbook when providing the employee with a vehicle?
(b) If so, what information should be included in that log?
(c) If the employee does not provide a travel logbook, (i) how should the employer calculate the taxable benefits, (ii) should the employer estimate the kilometers traveled for personal purposes in calculating the benefit from the operation of the automobile or should it treat all the kilometers traveled as being for personal purposes, and iii) respecting the benefit relating to the use of the automobile, can the employer estimate the kilometers travelled or should it systematically tax the entire benefit without the potential for availing of the reduction permitted by subsection 6(2)?
CRA Response
The Act requires an employer to calculate a taxable benefit when placing a motor vehicle at the disposal of an employee for personal use.
By virtue of section 230(1) an employer must keep records and books of account to determine the amount of taxes payable under the Act. However, it does not set out documentary requirements for recording the usage of a vehicle.
The best way to determine that a vehicle is used for commercial or personal purposes is to keep an accurate record of all trips made for the whole year, including for each trip the date, destination, the reason for the travel and the distance traveled.
In general, it is expected that a person who uses a motor vehicle for commercial and personal purposes will maintain a record that objectively determines the use of that vehicle.
In the absence of such a record, an employer must demonstrate by other means how the employer determined the value of the benefit that the employee must include in computing the employee’s income.
Isabelle Landry
(450) 623-0193
5 October 2012
2012-045415
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 Paragraph 6(1)(k)
2 Paragraph 6(1)(e) and subsection 6(2)
3 CANADA REVENUE AGENCY, Technical Interpretation 2005-0119451E5, 14 March 2005.