Working with your Corporation Part 8: Vehicle Expenses

When running your business you may require a vehicle to travel back and forth from offices or workplaces, pick up supplies, meet with clients and much more.  Vehicle expenses are a very typical deduction for most businesses.  Vehicle expenses may be reported in 2 ways: by mileage or by actual cost of vehicle expenses.  If you own the vehicle personally you should keep a mileage log to determine the amount of kilometers you traveled for business and then the company could reimburse you the prescribed rate per kilometer.  Because these prescribed mileage rates change it is good to inquire as to the current rates for reimbursement of mileage.  If the company owns the vehicle and you are using it for personal use then a mileage log must be kept for this method as well to determine which portion of the vehicle expenses are for business versus what is for personal.  The same rules apply whether you own or lease the vehicle.

Notes on vehicle ownership: It is important to differentiate who owns the vehicle, you or the company.  To determine this we must look at who the bill of sale is to (who purchased the vehicle).  Insurance should also be in the name of the owner of the vehicle.  Remember that you can sell a vehicle to the company, however this should be done at Fair Market Value and using an actual bill of sale.

Notes on keeping a mileage log:  It is important to keep a separate log for each vehicle which is driven for both business and personal.  The log should record the date of each business trip, destination, reason for the trip and the kilometres driven.  Also, make sure to record the odometer reading at the beginning and end of each year to determine the total kilometres driven in the fiscal year.  If you have a smart phone, such as an Iphone or Blackberry you can get a tracking app that can even work with your phone’s GPS for ease of tracking. 

Once you have maintained a log for a full 12-month period, the CRA has indicated that they would “afford considerable weight” to a log maintained for a “sample period” as evidence of the business use for a full year, if it meets the required criteria. 

If you want to avoid a mileage log you need to have a vehicle that is used for personal and a different vehicle that is used for business.