20 July 2004 External T.I. 2004-0073791E5 - Emergency Response Vehicles

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Are vehicles used by ambulance supervisors excluded from the definition of automobile in subsection 248(1)?

Position: Question of fact.

Reasons: Although the vehicles do not meet the exceptions in paragraph (b) or (b.1) of the definition, they may be excluded because of subparagraph (e)(i) or (e)(ii).

XXXXXXXXXX 		T. Young, CA
		2004-007379
July 20, 2004

Dear XXXXXXXXXX:

Re: Definition of Automobile

We are writing in response to your March 16, 2004 letter addressed to the Shawinigan-Sud Taxation Centre concerning whether motor vehicles driven by ambulance services supervisors who are employed by the Emergency Services Department (the "Supervisors") are excluded from the definition of "automobile" as defined in subsection 248(1) of the Income Tax Act (the "Act"). Your letter was forwarded to us on April 29, 2004, for reply.

You indicate that the Supervisors are provided with Emergency Response Vehicles ("ERVs") as specified under the Ontario Provincial Land Ambulance and Emergency Response Vehicle Standard (version 2.0 - October 15, 2001). The ERVs are "fully marked and equipped to respond to emergencies." All movements of the ERVs are registered and monitored. The Supervisors are on call on a 24-hour basis and cannot use the ERVs for any personal use. In your view, ERVs are governed by the same legislation as an ambulance and should be given the same tax exemption as fire and police emergency response vehicles.

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 ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to provide the following comments, which may be of assistance to you.

When an employer makes a motor vehicle available for an employee's personal use, it generally gives rise to a taxable benefit that must be included in the employee's income. Determining the value of the benefit depends, in part, on whether the motor vehicle in question is an "automobile" as defined under section 248(1) of the Act. The taxable benefit for the personal use and availability of an automobile is included in the employee's income under paragraph 6(1)(e) of the Act as a "standby charge", and depends upon factors such as whether the automobile is available for the employee's use and its personal versus business use. Where the employer pays any of the operating costs of the automobile, an "operating cost benefit" is included in the employee's income under paragraph 6(1)(k) of the Act.

The taxable benefit for the personal use of a motor vehicle, other than an automobile, is included in the employee's income under paragraph 6(1)(a) of the Act. It is based upon a reasonable calculation of the value of the benefit derived by the employee, which can vary in differing circumstances, again depending upon such factors as personal use of the motor vehicle.

The definition of "automobile" in subsection 248(1) of the Act (the "Definition") states that "automobile" means:

(a) 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,

but does not include:

(b) an ambulance,

(b.1) a clearly marked emergency-response vehicle that is used in connection with or in the course of an individual's office or employment with a fire department or the police;

(c) [certain taxis, buses and hearses]

(d) [certain motor vehicles for sale or rental, or used in a funeral business]

(e) a motor vehicle

(i) of a type commonly called a van or pick-up truck, or a similar vehicle, that has 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,

(ii) of a type commonly called a van or pick-up truck, or a similar vehicle, 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, or

(iii) [used at a special work site or a remote work location]

Based on your letter, we are of the view that the ERVs are motor vehicles described in paragraph (a) of the Definition. Therefore, they are automobiles under the Act unless one of the exceptions enumerated in paragraphs (b) to (e) of the Definition applies.

In our view, the exceptions in paragraphs (c) and (d) and subparagraph (e)(iii) do not apply to the ERVs. We address each of the other exceptions below and discuss generally the calculation of the taxable benefit.

Paragraph (b): Ambulances

The term "ambulance" is not defined in the Act. However, subsection 1(1) of the Ambulance Act of Ontario defines ambulance as:

a conveyance used or intended to be used for the transportation of persons who,

(a) have suffered a trauma or an acute onset of illness either of which could endanger their life, limb or function, or

(b) have been judged by a physician or a health care provider designated by a physician to be in an unstable medical condition and to require, while being transported, the care of a physician, nurse, other health care provider, emergency medical attendant or paramedic, and the use of a stretcher; ("ambulance")

It is our understanding that the ERVs are not used or intended to transport patients and, therefore, cannot be considered an ambulance. Consequently, in our view, the exclusion in paragraph (b) of the Definition does not apply.

Paragraph (b.1): Emergency Police and Fire Vehicles

Although, the ERVs are clearly marked emergency-response vehicles, it is our understanding that they are not "used in connection with or in the course of an individual's office or employment with a fire department or the police". Therefore, in our view, the exclusion in paragraph (b.1) of the Definition does not apply.

Subparagraphs (e)(i) and (e)(ii): Vans, Pick-up Trucks or Similar Vehicles

In our view, the ERVs may be excluded from the Definition because of subparagraph (e)(i) or (e)(ii). Whether these exclusions apply to a particular ERV is a question of fact. This determination is based on whether the ERV is a van, pick-up truck or similar vehicle and the amount of its use in transporting goods, equipment or passengers for business purposes.

Calculation of the Taxable Benefit

In your letter, you refer to the "tax exemption" for police and fire emergency response vehicles. As noted in paragraph 23 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, although there is no standby charge calculation or operating expense benefit derived from a motor vehicle that is not an automobile, an employee may still be in receipt of a taxable benefit under paragraph 6(1)(a) of the Act for the personal use of the vehicle. Further, paragraph 5 of IT-63R5 states that travel between an employee's place of work and home is considered personal, even if the employee may have to return to work after regular duty hours. There is an exception where the employee proceeds directly from home to a point of call other than the employer's place of business to which the employee regularly reports, or returns home from such a point. In such cases, the trip would be considered employment-related where its primary purpose was to carry out work-related duties.

We also note that, for 2003 and later tax years, the automobile standby charge is reduced if the automobile is used more than 50% of the time for business purposes and the kilometres for personal use do not exceed 1,667 per 30-day period (for a total of 20,004 kilometres per year). Based on the information you provided, this reduction may be applicable to the calculation of the standby charge for the ERVs that are automobiles. Under the old rules, the standby charge could only be reduced if the automobile was used at least 90% of the time for business purposes and the kilometres for personal use was less than 1,000 per 30-day period (for a total of 12,000 kilometres a year).

In view of the above, other than where a Supervisor proceeds from his or home directly to the Emergency Services Department or returns home from there, we would expect that all of the distance driven in an ERV would be work-related. Accordingly, any standby charge attributable to the personal use and availability of an ERV that is an automobile would be substantially reduced under the new rules.

The publications referred to above may be found on our web site at www.cra.gc.ca. We trust our comments will be of assistance to you.

Yours truly,

Randy Hewlett, B. Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch