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Intensified audit of the benefits associated with using an employer's automobile

December 15, 2014
Category :  Articles

The inclusion in an employee’s income of taxable benefits in respect of personal use of the employer’s automobile and the calculations associated with these benefits are a regular focus for tax authorities these days. For some time now, Revenu Québec has intensified its audit activity and diversified its methods of investigation in this regard.

In addition to making enquiries and monitoring corporate books and documents on a regular basis, Revenu Québec is now cross-referencing data.  By linking records—from the SAAQ, specifically—Revenu Québec is able to determine which employees do not own their own vehicle. The information from the SAAQ (Quebec automobile insurance board) also helps them to monitor employees who have registered trailers or campers when their personal vehicle is not suitable for this type of transportation. The toll highway (A-25) database is also a source of useful information for the government.

When an employer makes an automobile available for use by an employee, and that employee uses it partially or wholly for personal reasons, namely, outside the scope of their employment, it represents a taxable benefit. For example, in the eyes of the tax authorities, travel between the employee’s home and the employer’s place of business is considered personal use of the vehicle.

Once the employer establishes that a portion of the travel is for personal reasons, the benefit amount must be calculated on the basis of a standby charge and operating costs. The amount established by the employer is then to be included in the employee’s income, and certain source deductions must be made. GST and QST also need to be collected and submitted to the appropriate levels of government. Please note that the standby charge may be reduced if the employee uses the automobile more than 50% of the time for work-related purposes, if personal use accounts for fewer than 1,667 kilometres per month and a choice is made in this regard and kept on the employer’s file.

A logbook is a very worthwhile tool for employees to record their kilometres travelled for business purposes and it provides tangible proof of their calculations for the government. Otherwise, an employee must be able to provide convincing, satisfactory evidence of work-related travel by some other means.

Since 2005, Revenu Québec has had the authority to impose an annual penalty of $200 on any employee who fails to submit a logbook to their employer by the prescribed date.

For more information regarding taxable benefits pertaining to automobiles, go to: www.fbl.com/_media/document/958/automobile-2014.pdf  [French only]

 

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