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Is there itc on automobile allowance for sh

If you a sole director/shareholder of a CCPC when recording the auto allowance/reimbursement for business-related km on your personal vehicle is there an associated ITC for the corp?

E.G.
You own a CCPC - which you use your personal vehicle for business-related commercial activity.
At year-end you have used 3500 business km .

3500km x 0.55cents = $1925

AUTO EXPENSES $1925
SH LOAN $1925

IS THERE ALSO AN ITC FOR THE CCPC (ONTARIO)

$1925 X (13/113) = $221.46

I was able to find information on employees but nothing on SH.

Unless the shareholder is also an employee (who could earn a nominal amount), I expect Canada Revenue Agency will be handling the business use of a personal vehicle the same way they would for a proprietor. 8(

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http://www.canhamrogers.com/Jan%202014%20Employer%20HST%20ITC%20Claims%20for%20Employee%20Mileage%20Payments.pdf

http://www.mnp.ca/en/posts/gst-and-employee-benefits-allowances-and-reimbursements

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/9-3/allowances.html

GST/HST memorandum 9.3
June 2012

NOTE: This version replaces GST Memorandum 400-3-11, Allowances and Reimbursements dated February 1992.

Amounts that are not allowances
Reimbursement

  1. A reimbursement is a payment made by one person to repay another person for amounts spent. An amount constitutes a reimbursement where the amount is fully accounted for by the person receiving the payment (i.e., evidenced by supporting vouchers or records). Consequently, an allowance is not a reimbursement. Detailed information on reimbursements is available in Memorandum 9.4, Reimbursements.

My Note-1
The rest of this GST Memorandum states the word “allowance”, however, the requirements, administrative policies, and limits to claiming the ITC on reimbursements refer equally to allowance and reimbursements. I call CRA GST Rulings each and every year to validate this. My last call was in November 2017 re the 2017 Payroll Year.

My Note-2
Whether this is paid as an allowance or a reimbursement is a matter of fact and based upon the employment agreement, payroll details, reimbursement expense reports and checks paid, and, signed T2200 Conditions of Employment. Please note that CRA regularly reviews this line item against both employer and employee records when the employee claims the employment expense.

CRA
"Amounts that are not allowances
Reimbursement

  1. A reimbursement is a payment made by one person to repay another person for amounts spent. An amount constitutes a reimbursement where the amount is fully accounted for by the person receiving the payment (i.e., evidenced by supporting vouchers or records). Consequently, an allowance is not a reimbursement. Detailed information on reimbursements is available in Memorandum 9.4, Reimbursements."

My Note-3
The rest of this GST Memorandum states the four requirements and the conditions.

CRA
"First condition: the allowance is paid to an employee, partner or volunteer.“
Meaning of employee, ss 123(1),
Paragraph 8. The term “employee” includes an officer.”

" Second condition: the allowance is paid for taxable supplies or the use of a motor vehicle."
" Third condition: the amount of the allowance is deductible for income tax purposes."
“Fourth condition – the travel and motor vehicle allowance is reasonable.”

  1. Generally, an allowance for the use of a motor vehicle is paid on:
  • a per kilometre basis;
  • a flat or fixed amount; or
  • a combination of an amount calculated on a per kilometre basis and a flat or fixed amount.
    Ref:- Per kilometre allowance, subpara 6(1)(b)(x) of the ITA

ETC…

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https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/9-4/reimbursements.html

Reimbursements
GST/HST memorandum 9.4
June 2012

NOTE: This version replaces GST Memorandum 400-3-11, Allowances and Reimbursements dated February 1992.

Table of Contents
Meaning of reimbursement
Amounts that are not reimbursements
Purpose of section 175 and eligibility requirements
First condition: the reimbursement is paid to an employee, partner or volunteer
Second condition: for consumption or use in relation to activities of the employer, partnership, charity or public institution
Third condition: employee, partner or volunteer have paid the tax payable
Calculation of the tax deemed paid
Calculation of the ITC and rebate
Credit card expenses
Documentary evidence
Appendix

First condition: the reimbursement is paid to an employee, partner or volunteer

Second condition: for consumption or use in relation to activities of the employer, partnership, charity or public institution

Third condition: employee, partner or volunteer have paid the tax payable
Calculation of the tax deemed paid - Example 4 + 5
Calculation of the ITC and rebate - Example 6
35. The CRA will permit persons to use factors for calculating ITCs and rebates on expenses charged to company credit cards, provided the following conditions are satisfied:
36. The CRA considers a direct payment made on account by the person to the card issuer to be a reimbursement as long as the liability for payment of the credit card statement does not rest entirely with the person.
37. Furthermore, if only the person, and not the card member, is liable to pay the company credit card account, it is the CRA’s view that the person paid the expense and not the card member. Therefore, the card member is not being reimbursed by the person for any amount.
Example 7

NB -
Documentary evidence

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I like issuing a nominal YE Bonus Payroll to enable owner/operators the option of claiming employment expenses on the difference between the reimbursement amount and the actual pro-rated costs based on their detailed pro-rated actual vehicle expenses.

A kms log is essential to make this claim.

Supporting documents regularly reviewed and audited by CRA include

  • Employment Agreement
  • Conditions of Employment T2200
  • Kms log
  • Reimbursed expense reports
  • Summary and detailed GL provided by the employer of all reimbursed expenses.
  • Declaration regarding employer paid vehicle expenses. IE gas and/or maintenance.
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Hello Dominique,

Your responses are highly appreciated.

First I would like to discuss the shareholder/sole director being an officer.

As you mentioned below:

Allowances
GST/HST memorandum 9.3 - Paragraph 8:

  1. The term “employee” includes an officer.

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/9-3/allowances.html

-The Shareholder/sole director in my scenario is also the President and Secretary (officers) of their CCPC.

Although the position of an officer is distinct from that of a director, in a small corporation(CCPC) one individual very often occupies both positions, which is the case in this scenario.

Conclusion - the shareholder/sole director is an officer for the purposes of this discussion.

Second I would like to discuss the application/calculation of the ITC:

The shareholder/sole director (also president & secretary) has incurred 2660 business kms on his personal vehicle in the year 2017.

The allowance rate set by the CRA is 0.54cents (2017).

Therefore, 0.54cents x 2660 = $1436.40

The ITC for the province of Ontario is 13/113

=$1436.4 x (13/113)
ITC= $165.25

$1436.40 - $165.25 = $1271.15

Therefore the journal entry at year end will look like the following?

Auto Expense (expense for the Corp) $1271.15
HST Payable (ITC - for the Corp ) $165.25
Shareholder Loan $1436.40
(Allowance to officer for business use of personal vehicle

Thank you so much for your responses - they are greatly appreciated, as well as, your shared knowledge.