The CRA website now includes a post on the new method for keeping track of motor vehicle expenses.
As all accountants know, motor vehicle expenses are low-hanging fruit for a CRA auditor. Clients rarely keep the much discussed but never seen Logbook that the CRA wants all business people who drive cars to keep. The CRA’s new approach is meant to relieve the burden associated with keeping a log. The post states that
The best evidence to support the use of a vehicle is an accurate logbook of business travel maintained for the entire year, showing for each business trip, the destination, the reason for the trip and the distance covered.
The new approach allows taxpayers to create a sample logbook. The post states that
The CRA would be prepared to afford considerable weight to a logbook maintained for a sample period as evidence of a full year’s usage of a vehicle if it meets the following criteria.
- The taxpayer has previously filled out and retained a logbook covering a full 12-month period that was typical for the business (the “base year”). The 12-month period is not required to be a calendar year.
- A logbook for a sample period of at least one continuous three-month period in each subsequent year has been maintained (the “sample year period”).
- The distances travelled and the business use of the vehicle during the three-month sample period is within 10 percentage points of the corresponding figures for the same three-month period in the base year (the “base year period”).
- The calculated annual business use of the vehicle in a subsequent year does not go up or down by more than 10 percentage points in comparison to the base year.
Is it me, or is the CRA’s tone in this post less-than-enthusiastic about the sample method?
