Subsistence allowance/Per-deum continues to be a controversial topic among accountants, not CRA agents but accountants. They seem to continuously mumble about its application and their firms liability. Operators get half truths one month and reversals the next. If accountants don’t “get with it” operators bumping down the road will loose their faith in either the system, their current accountant or both.
When I first started publishing articles (after my book) I thought the lion share of education would be directed at the operators not the accountants. Oh well, it seems I’ll be tapping away at two industries simultaneously.
Last week we had another client go through an audit. It’s a standard thing for clients to be audited. The interesting thing about this one was that contrary to our communication to our client harsh and strong words were directed at the auditor. Apparently our clients thought it “prudent” to give the auditor a piece of their mind before the audit even began. This is not advisable under any situation since auditors have a great deal of autonomy and can make things much more difficult than they normally are. Though some accountants would like to mussel clients we have not gone that far… yet (just kidding).
The audit actually went exceptionally well even though the “foundation” started shaky. If fact our entire system got anther round of compliments, the employer-employee agreement all the way down to the personal vehicle log. It helped that the client was A rated and balanced down to zero regularly (monthly). All our other audits occurred with C or D rated.
Even so, I am still convinced that the application of subsistence nationally is dependant on a universal application of standards among accountants and operators. Two or three years from now, if Ottawa politics changes every subsistence allowance user may find themselves in the crosshairs if not universally applied.
I’m focused on making the system secure… which is sometimes a challenge when dealing with CRA.
About Me
Tuesday, May 26, 2009
Tuesday, May 12, 2009
That's my story.... one more time!
Two more court cases came into the media recently, both had to do with personal vehicle, log books, and company vehicles (in this example leases). I have been rather blunt regarding business use of personal vehicle or company vehicle used for personal use, even accused of being more rigorous than the average bean counter. These two situations may bring some clarity as to both my position and my “standards”.
The first was Jorgensen v. Canada, 2009 T.C.J. No. 20, T.C.C., Sheridan J., Jan 19/09. Digest No. 2846-025 (Approx. 7 pp.). A farmer had an extended cab diesel truck with no log books supplied. Other not so critical information was that the taxpayer traded in the lease as soon as the warranty expired or was about to expire. Additionally the “extended cab” was modified or converted to a “non-passenger”.
The judge (considering all the evidence) assessed that the truck was used all or substantially all for business purposes. Even though the taxpayers did not maintain a daily record of the trucks use, they maintained sufficient source records of their business activities to allow them to reconstruct a reasonable diary of the business use of the truck.
This, at face value, seems to contradict much of what I have been stating. However, let’s look at the second case.
The second is Martin v. Canada 2009 T.C.J. No. 2, T.C.C., Margeson J., Jan 05/09. Digest No. 2846-023 (Approx. 13 pp.). A corporation leased vehicle was provided to the wives of two shareholders. CRA assessed taxable benefits and standby charges for each participant. There were no log books supplied and the vehicles were licensed as personal use. The judge agreed with CRA in this case.
In my personal estimation 70%+ of personal vehicles that are used for business purposes (and are used as deductions) do not have log books. Too many accountants revert to the first case assuming they can “reconstruct” a defense after that fact. Many auditors don’t push the issue. The industry assumption becomes “no log book is defendable”. I still strongly disagree, especially in the trucking industry. The Jorgensen’s were farmers, which is a completely different industry than trucking. Driving to and from fields moving equipment and supplies is vastly different than using a “second vehicle” to transfer paperwork and supplies. Reconstructing a reasonable diary for a trucker (without a log) will be vastly different. It will be similar to the Martin case where vehicles are licensed as personal rather than farm use.
My position stands! No log book (for truckers using personal vehicle) no deduction. That’s my story and I’m sticking to it.
The first was Jorgensen v. Canada, 2009 T.C.J. No. 20, T.C.C., Sheridan J., Jan 19/09. Digest No. 2846-025 (Approx. 7 pp.). A farmer had an extended cab diesel truck with no log books supplied. Other not so critical information was that the taxpayer traded in the lease as soon as the warranty expired or was about to expire. Additionally the “extended cab” was modified or converted to a “non-passenger”.
The judge (considering all the evidence) assessed that the truck was used all or substantially all for business purposes. Even though the taxpayers did not maintain a daily record of the trucks use, they maintained sufficient source records of their business activities to allow them to reconstruct a reasonable diary of the business use of the truck.
This, at face value, seems to contradict much of what I have been stating. However, let’s look at the second case.
The second is Martin v. Canada 2009 T.C.J. No. 2, T.C.C., Margeson J., Jan 05/09. Digest No. 2846-023 (Approx. 13 pp.). A corporation leased vehicle was provided to the wives of two shareholders. CRA assessed taxable benefits and standby charges for each participant. There were no log books supplied and the vehicles were licensed as personal use. The judge agreed with CRA in this case.
In my personal estimation 70%+ of personal vehicles that are used for business purposes (and are used as deductions) do not have log books. Too many accountants revert to the first case assuming they can “reconstruct” a defense after that fact. Many auditors don’t push the issue. The industry assumption becomes “no log book is defendable”. I still strongly disagree, especially in the trucking industry. The Jorgensen’s were farmers, which is a completely different industry than trucking. Driving to and from fields moving equipment and supplies is vastly different than using a “second vehicle” to transfer paperwork and supplies. Reconstructing a reasonable diary for a trucker (without a log) will be vastly different. It will be similar to the Martin case where vehicles are licensed as personal rather than farm use.
My position stands! No log book (for truckers using personal vehicle) no deduction. That’s my story and I’m sticking to it.
Tuesday, May 5, 2009
Subsistence Allowance, a look to the future
OK! Long time no update. Congratulations to all those who won a copy of my book on CD. April was a very busy month for me. We have received a great deal of communication about subsistence allowance coast to coast. It seems many accountants are realizing the national implications.
This is what I predict will happen over the next several years (assuming no political changes in Ottawa). Independent accountants will apply subsistence allowance (per-deum) to clients (usually with a signed liability waver). Therefore operators will be left “vulnerable” to regional auditor interpretations.
Until CRA comes out with specific bulletins on the trucking industry applications the entire system will not be “confirmed” in the minds of many designated accountants. Since currently no firm is publicly willing to ensure the application (providing protection as we do) the entire industry is left without assurance (something CRA has on their side). One of the several reasons I believe they will NOT comment publicly for several years (if at all).
It’s a little like what happened when Don Wilkenson won that court case in August 2000. Within a couple months accountants all across Canada knew that the TL2 was not restricted to CRA guidelines, however, they were not informed of what number they CAN use… therefore to ensure returns accountants continued to restrict THEMSELVES to the guidelines. Uncertainty fosters conservative standards… or… if in doubt leave it out!
For those who want to know what needs to be done read my prior posts. It makes more sense when you start reading from November 1st 2008
This is what I predict will happen over the next several years (assuming no political changes in Ottawa). Independent accountants will apply subsistence allowance (per-deum) to clients (usually with a signed liability waver). Therefore operators will be left “vulnerable” to regional auditor interpretations.
Until CRA comes out with specific bulletins on the trucking industry applications the entire system will not be “confirmed” in the minds of many designated accountants. Since currently no firm is publicly willing to ensure the application (providing protection as we do) the entire industry is left without assurance (something CRA has on their side). One of the several reasons I believe they will NOT comment publicly for several years (if at all).
It’s a little like what happened when Don Wilkenson won that court case in August 2000. Within a couple months accountants all across Canada knew that the TL2 was not restricted to CRA guidelines, however, they were not informed of what number they CAN use… therefore to ensure returns accountants continued to restrict THEMSELVES to the guidelines. Uncertainty fosters conservative standards… or… if in doubt leave it out!
For those who want to know what needs to be done read my prior posts. It makes more sense when you start reading from November 1st 2008
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