CRA’s new truck and SUV project and reviews of cell phone expenses

It has been reported and now confirmed there is a new CRA project – Class 10 vehicles.

What is a “Class 10 Vehicle”?

Included in Class 10 vehicles are:

  • Pick-up truck or van used to transport goods or equipment seats 1-3 people and used 50% or more for business.
  • Pick-up truck with extended cab, van, or SUV used to transport goods, equipment, or passengers, seats 4-9 people, and used 90% or more for business.

Why does it matter?

Most other passenger vehicles other than the above are restricted in the amount of capital cost allowance (i.e. depreciation) and leasing costs allowed – Currently $30,000 or $800 per month plus HST, respectively,

Suppose a business purchased a $75,000 extended-cab pickup or SUV which was proven not to be used 90% or more for business. CRA will disallow $45,000 of depreciation expense over the life of the vehicle, require you to repay a portion of the HST, and charge you interest on unpaid taxes.

What is CRA asking for? Letters from the CRA request a bill of sale, the amount of HST claimed, copies of registration and insurance, a description of how the vehicle is used for business activities and the percentage used for business. You should also be prepared to provide a vehicle log to prove the business use of the vehicle upon request.

Telephone and communications – Employment expenses

We have also recently seen CRA request proof of use of telephone and data for individuals claiming employment expenses, especially non-commissioned employees.

The CRA’s rules:

  • Cell Phone: You cannot deduct amounts you paid to connect or license a cell phone. You can deduct a portion of the basic cell phone service if:

1. you can substantiate the minutes or data used directly in the performance of your employment duties (as well as the cost of the minutes or data); and

2. the cost of the plan has been apportioned between employment and personal use on a reasonable basis;

  • Home phone and internet: You cannot deduct the monthly basic rate for your home telephone or access fee for home internet service.
  • Phone and computer equipment: You cannot deduct the cost to purchase the cell phone, tablet, or computer

Needless to say, the administrative burden keeping track of telephone and data usage is very cumbersome for individuals, if at all possible.

As always, to claim any employment expenses you must be required to provide and pay for those expenses under the terms of your employment contract and have the form T2200 Declaration of Conditions of Employment signed by your employer. See the CRA’s employment expenses guide T4044 for detailed information.

Feel free to contact your Sloan Partners advisor with assistance to responding to CRA request or any other income tax matter.

Roman Belenky, CPA, CGA, BAS, is a supervisor at Sloan Partners focusing on tax planning and compliance.  Feel free to email or call 416-665-7735 (ext. 227) for all of your tax planning needs.

Disclaimer: This article is intended for educational and informational purposes only. It is not intended in any way whatsoever to provide tax advice. The reader should be aware that legislation and government policies and procedures are always subject to change. None of the persons involved in the preparation of this article accepts any responsibility for its contents or the consequences that arise from its use.

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