I have one of clients messed up on vehicle purchase and expensing, and I would like to confirm by all of you guru before explaining his situation.
This client incorporated Jun 2024 - he had different accountant when he opened corp, but he came to me in Oct 2024.
He purchased a used Truck under his personal name.
It is very clear that he can claim mileage base - as he purchased it by his name.
However, it seems his previous accountant didn’t explain this concept.
He still thinks he can claim all of expense (such as Maintenance, fuel, insurance)
all because his Truck is registered to MTO as a Commercial Auto.
I believe it doesn’t matter with MTO classification if his Truck is registered under personal name, however, I would like to confirm with Tax experts that I am correct.
Please help me with this question, any comments will be very grateful.
I am already stressed out to ask mileage history for his 2024 work since he is very disorganized person.
I am no tax expert, just a guy with his own corporation. I do it the same as you. I use my personal vehicle (just a small car) and charge km to the corporation. Then I only have to keep track of the business km, no messing around with receipts. I do ok this way because the car is already depreciated and has low running costs.
If his truck is expensive to run, and specialized for his work he may want to sell it to his corporation. But he will likely have to transfer ownership, registration, and do the appropriate journal entries. And he will need to address what happens if he uses the vehicle for personal use.
I think, if this is commercial truck, then he is not using it for personal. All the expenses must be claimed. if its a personal vehicle (car) used for business, then you need to prorate his motor vehicle expenses.
If his truck is expensive to run, and specialized for his work he may want to sell it to his corporation. But he will likely have to transfer ownership, registration, and do the appropriate journal entries. And he will need to address what happens if he uses the vehicle for personal use.
This. If it’s commercial use, roll it over via Section 85 and allocate a personal use portion where, and if neccessary. This is just a surface level analysis…
Yup… if it is for the business… it needs to be owned by the business.
For the period of time up until he moves it over… he could personally Rent it out to the corp for that period at a cost which would cover the expenses already incurred. Keep in mind, your goal is to come close to zero rental income on his personal tax return( but please declare it). Depending on the $ values we are talking, do not forget potential GST registration if the Rental sales exceed $30K
More complicated for sure when clients think that corp is an extension of themselves and intertwine with personal.
Is he an employee of his corporation? If so, could he not just kept it personally and use the prescribed mileage rates to deduct the expense in the corporation?
@Versa
I believe the article you linked is the rates that CRA reimburses its employees for travel when on CRA business. That doesn’t mean it is applicable to all businesses in Canada, nor that it supersedes the tax laws regarding tax deductibility of travel expenses.
Sorry my bad wrong link. See below. If an employer provides a reasonable non-taxable allowance to the employee for business use of the employee’s personal vehicle, that allowance may be non-taxable to the employee and deductible in the corporation if certain conditions are met.
