Lease is treated as an expense regardless of the business entity - proprietor vs corporation.
Purchase is treated as an addition to the asset account and the amortization amount is expensed.
The difference between the vehicle accounting in a proprietorship vs a corporation include:-
Proprietorship - simple %
Corporation - taxable benefit for personal use and personal stand-by charge.
<90% Business Use in Corporation
- Taxable Benefit for personal use and for standby charge
- GST claim impacted.
- Generally better off to own vehicle personally.
- Then you can either receive kms reimbursement or a T2200 and claim as T777 against payroll
This topic is covered but not clearly in my references above.
What I do to master a topic is to create sample data and work through the examples in the following areas:-
Bookkeeping - using T accounts
Bookkeeping - using double entry bookkeeping app
Excel - Capital Asset Continuity with CCA applied each year
Excel - Lease expense reconciliation
Business Tax - T2125
Corporate Tax - T2
Payroll Tax - T4
Personal Tax - T1 with reimbursement at prescribed rate
Personal Tax - T1 with T4 including taxable benefit
Personal Tax - T1 with T2200 + T777 employment expense
Then I compare each scenario for the following -
After tax impact
This is generally a lot of work. For a complex situation which I don’t fully understand at the outset. It may take me two weeks to a month spending half a day to a day per week checking references, thinking about scenarios, running the numbers for each scenario.
I also run through my understanding of the Tax Laws, Regulations, Rulings, and Tax Court decisions which impact this topic. I look to see how this may have changed during the past 10 years or since the last major modification. I then watch the topic quarterly for the subsequent three years to make sure that I am current.
If I find the topic very confusing, then I generally find that I have either missed one or more key facts or calculations, or I have a faulty assumption which I do not recognize as faulty. I keep noodling through the topic and examples until the topic is completely familiar to me and until I can recognize the patterns and requirements quickly and easily.
A topic such as vehicle expense, vehicle capitalization, and lease expense is so pervasive in both bookkeeping and tax that you must master this however works best for you. However, in no way can you circumvent mastering this topic and still expect to produce quality bookkeeping and quality tax.
Summer and early fall is a great time of year to dedicate to filling blind spots and mastering complex topics.
Bookkeeping and tax preparation are not simple data entry jobs. A good deal of analysis, technical knowledge, and the correct application of often apparently conflicting rules need to be mastered.
Video Tax News -
5 in 55: GST/HST Traps for the Owner-Managed Business and Individual
The Canadian Payroll Association
Taxable Benefits and Allowances
Avoid government audits. Know the rules on the more than 40 common taxable benefits and allowances included in employment income, such as automobile allowances, loan and stock options, gift cards, and more. Make sure your employer is accurately withholding, remitting and complying with year-end reporting requirements.
Automobile Taxable Benefits
Learn - Automobile vs Motor Vehicle
Learn - Standby Charge Benefit
Learn - Operation Cost Benefit
Taxtips - Other topics re vehicles and business
Canada Revenue Agency Resources:
T4130 Employers’ Guide Taxable Benefits and Allowances
GST/HST Memorandum 9-2 Automobile Benefits
Income Tax Folio S2-F3-C2 Employer-provided Vehicle Taken Home at Night - scroll down
Podcasts: Taxable Benefits
IT-63R5 - Benefits, Including Standby Charge for an Automobile, from the Personal Use of a Motor Vehicle Supplied by an Employer - After 1992 (Archived),
Automobile and motor vehicle benefits and allowances