14 October 1999 External T.I. 9916355 - EMPLOYER PROVIDED VEHICLE BENEFITS

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues: Whether the use of employer-provided vehicles in travelling between the employees' homes and their regular place of employment in certain circumstances (e.g. the employee will be on call) is of a personal nature.

Position: We have maintained the position that travel between the home and the regular workplace is of a personal nature..

Reasons: The main purpose of the trips is considered to be personal..

XXXXXXXXXX 5-991635

Karen Power, C.A.

October 14, 1999

Dear Sirs:

Re: Employer-Provided Vehicles - Taxable Benefits

We are writing in reply to your letter of June 6, 1999 requesting our views concerning the determination of employee taxable benefits for employer-provided vehicles.

XXXXXXXXXX

Our Comments

The particular circumstances in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R3, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. However, we are prepared to offer the following general comments which may be of some assistance to you.

The value of the benefit derived by an employee from the personal use and availability of an automobile supplied by an employer is required to be included in calculating the employee's income. This value is an amount equal to a prescribed amount per kilometre for operating costs in connection with personal use and a "reasonable standby charge" (plus the equivalent to the Goods and Services Tax (GST) on the standby charge). In general, this standby charge is 2% per month of the cost of the automobile, or 2/3 of the lease costs calculated with reference to the number of days the automobile was available to the employee or to a person related to the employee. However, this standby charge may be reduced when the personal use is less than 1,000 kilometres a month and the business use portion of the total kilometres travelled is 90% or more. Further, provided the automobile is used primarily for business purposes, an amount equal to one-half of the standby charge benefit may be used as the amount of the operating costs benefit in lieu of the prescribed per kilometre calculation.

Automobiles are defined under paragraph 248(1) of the Income Tax Act (the "Act"). This meaning is discussed in paragraph 2 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. According to this paragraph, a pick-up truck that has a seating capacity for not more than a driver and 2 passengers and is used primarily for the transportation of goods or equipment is not considered an automobile. However, a pick-up truck with an extended cab and a sport utility vehicle with seating capacity for more than three would meet the definition of an automobile.

Although the vehicles carry various types of equipment as described above, it is our general view that a vehicle that would otherwise be regarded as being an "automobile" as defined in the Act, cannot be excluded on the basis that the vehicle carries items that prevent the use of seats by passengers.

We have not been provided with the seating capacities of the XXXXXXXXXX vehicles and we cannot comment on whether your specific vehicles would be considered automobiles.

If the motor vehicles being provided are not automobiles, the provisions of the Act that are specific to employer-provided automobiles, i.e., the standby charge (paragraph 6(1)(e) of the Act) and the operating expense benefit (paragraph 6(1)(k) of the Act),

would not be applicable. Instead, an employee benefit in respect of such a vehicle would be included in income under the general provisions of paragraph 6(1)(a) of the Act. In this regard, refer to paragraph 23 of Interpretation Bulletin IT-63R5.

The Department takes the position, which is supported by the courts, that travel between an employee's residence and his or her regular place of work is personal. An individual's regular place of work is considered to be the place where the individual reports for work. This applies whether or not an automobile is made available to an employee, who is "on call". It is our general view that where an employee is "on call" as part of his or her employment duties, while travelling from the office to his home and vice versa, the trip is of a personal nature. An exception occurs, however, where (as required by the employer or with the employer's permission) the employee proceeds directly from home to a point of call other than the employer's place of business to which the employee reports regularly (e.g. to make repairs at customers' premises), or returns home from such a point. Further, once an automobile has been made available to an employee, the employee is subject to the standby charge for each day that he or she has access to, or control over, the automobile. Access is considered to end when an employee returns the keys of the automobile to the employer.

If XXXXXXXXXX is "on call" and is contacted by his or her office while driving home or to work and diverted to another point of call, it is our view that the portion of a trip from the point of diversion would normally be considered employment related and the portion of a trip up to that point would be considered to be personal in nature. It is also our view that if the employee maintains contact with the employer while travelling between the home and the regular workplace but is not diverted to another point of call, the trip would still be considered to be a personal nature. Finally, it is likely that travel from home to a point of call (other than the employer's place of business where the employee regularly works) to carry out XXXXXXXXXX activities (as well as the return trip home from such a point) would be considered employment-related.

An extensive study was carried out by this Department on the use of employer-provided automobiles by law enforcement and public safety personnel. The study concluded that it was not possible to provide an exemption for such vehicles from the current definition of "automobile" without prejudice to other individuals performing similar duties under similar conditions. The Act would have to be amended to provide an exemption for such vehicles. As tax policy issues and amendments to the Act are the responsibility of the Department of Finance, any changes to the definition of automobile would have to be considered by them.

In summary, in our view, XXXXXXXXXX receive a benefit taxable under either paragraphs 6(1)(e), 6(1)(k) or 6(1)(a) of the Act. However, these taxable benefits may be significantly reduced if, as described above, the personal use is less than 1,000 kilometres a month and the business use portion of the total kilometres travelled is 90% or more. We would recommend that detailed daily logs be maintained by all XXXXXXXXXX to support the amount of employment-related use.

We trust our comments will be of assistance to you.

Yours truly,

Roberta Albert, C.A.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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