25 September 2003 External T.I. 2003-0024765 - employment expenses

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 CCRA.

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

Principal Issues:

Can an employee deduct a portion of the standby charge as an employment expense?

Position TAKEN:

No.

Reasons:

The standby charge is not an amount expended by the taxpayer in the year in respect of motor vehicle expenses incurred for travelling in the course of the office or employment.

XXXXXXXXXX 		T. Young, CA
		2003-002476
September 25, 2003

Dear XXXXXXXXXX:

Re: Deduction of the Standby Charge as an Employment Expense

We are writing in response to your letter dated June 17, 2003, concerning the deduction of the automobile standby charge from employment income.

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.

Where an employer makes an automobile available for the use of an employee (or a person related to the employee), paragraph 6(1)(e) of the Income Tax Act (the "Act") requires that a standby charge be included in the employee's income. This benefit is calculated on the basis of the time that the automobile is made available to the employee, whether or not the vehicle is actually used during that time. In accordance with subsections 6(2) and 6(2.1) of the Act, the calculation contains a mechanism for reducing the standby charge to take into account the business use of the automobile. Beginning in 2003, where the personal use of the automobile is less than 1,667 kilometres per month and the automobile is used primarily in connection with or in the course of the office or employment, the standby charge is reduced. Prior to 2003, in order to reduce the standby charge, the personal use of the vehicle had to be less than 1,000 kilometres per month, and all or substantially all of the use - generally at least 90% - had to be in connection with or in the course of the office or employment.

Further, pursuant to subsection 8(2) of the Act, an employee may only deduct from employment income those reasonable outlays and expenses that are specifically permitted under section 8 of the Act. None of the provisions provide for a deduction of the standby charge. For more information on allowable motor vehicle expenses, refer to interpretation bulletin IT-522R, Vehicle, Travel and Sales Expenses of Employees.

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

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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