Providing employees with vehicles can be a challenge, but there are a range of tools for HR to use to make sure they're getting the best from their system.
Supplying company owned or leased vehicles has always been a challenge when determining the taxable benefit to employees, and probably one of the most abused as well. Canada Revenue Agency has made available a very useful tool on their site entitled Automobile Benefits OnLine Calculator. You can use this calculator to determine whether it is more beneficial to purchase the vehicle and supply it to the employee or to lease it for supply to the employee.
The company employer supplying the vehicle needs, in some instances, to determine whether the vehicle is an automobile or some other type of vehicle, as this can have a significant impact on deductible expenses for the business and taxable benefits to the employee. A pick-up truck can have varying interpretations.
Regular place of employment needs to be defined, as does a “point of call” in some instances, to determine whether the distance traveled from the employee’s home to the place of business or the first point of call is an allowable for calculating expenses.
The capital cost of a vehicle affects both allowable deductions to the employer and benefits to the employee, when considering a purchase or a lease. Personal use of an employer supplied vehicle needs to be kept track of in significant detail by using a log. If the vehicle is parked at the home of the employee over night instead of at the employer’s premises can affect taxable benefits, and can also be allowed in some instances.
For personal automobiles used for business, the company may reimburse a reasonable per km rate to the employee, which typically covers maintenance and fuel costs. The 2014 rate is $0.54 per kilometer for the first 5,000 km and $0.48 for each additional kilometer. For Nunavut, Yukon, and the Northwest Territories the rates are now $0.58 and $0.52 respectively. Also, an area of concern in reimbursement is that the rate used, if unreasonable high or low, can also result in tax implications.
Having the employee purchase or lease the vehicle is often a better solution. The onus then is on the employee solely to maintain detailed records to back up claims for Auto expenses.
Bill Smyth CPA, FCGA, FCPA
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