Vehicle owned in Corporation or Personal? Which is better?

Tax Topics
1

Hi All,

I have a client who wants to purchase a new car. She is a consultant and estimates business use will be less than 50%. She is asking me if she should put the new car in her corporation’s name or buy it personally. If the company owns it, I will have to calculate a standby charge back to the shareholder/employee and it will affect her personal taxes. With her old car which she owned personally, I had just calculated the non-taxable allowance based on her KMs driven and deducted that in the corporation.

I don’t do many corporate returns so this is new to me. Any insight on which would be more beneficial to her? She is a GST registrant so I’m thinking she can claim an ITC for the business use portion if it’s in the corp.

Thanks!

2

I’d continue with owning personally and charging back c/km option, especially with such low % biz use…and claim the ITC on c/km.

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3

Hi,

From CRA website… HST on operating expenses are treated differently than HST on the purchase of the vehicle.

Still limited to maximum CCA in the category ( differs if normal vehicle vs electric)

Mileage log is a must and this is an area CRA is actively reviewing.

Remember home to work and return is not considered business mileage.

You stated the business use is expected to be less than 50%.

Personally, I prefer to keep it simple and buy as a personal… keep mileage log and reimburse accordingly.

Unless, the personal car Insurance will not cover the vehicle while using it in a commercial operation.

This happens rarely but it depends on the “type of business use”. i.e. a service vehicle on woods logging roads may need a special rider

I find keeping it personal eliminates a lot of hassles when selling /transferring/trading of passenger vehicles.

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4

FAR and AWAY easier and less hassle to purchase/lease the vehicle personally - avoids an awful lot of lousy calculations you really don’t want to do.

Have the client use MileIQ or similar app for auto loogging of trips - identify the business ones as they go, and at the end of the year (month, quarter, whatever) charge back the appropriate amount at CRA auth’d rates, and pick up the GST ITC as a portion of that. Non-taxable to client/employee if reimbursed or just an expense to the corp charged vs shareholder loan.

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5

Plus, when you sold your business within the time the car operating, your car will be including company asset, unless you do further action for the car . Any thought on this? appreciate.

6

Depends on the agreement for sale. Share sale vs entire assets sale vs some assets sale. Also, whether corp has been cleaned of assets the original owner(s) wish to retain.

Other than that, it’s no different than any other asset being sold with a corp.

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