Being in business often means traveling for one reason or another. Outside salesmen often do extreme amounts of travelling. So do service reps, on-site support staff, taxi drivers and career truck drivers. The list goes on. These people are what I mean by road warriors. Their typical business day includes many hours and long distances on the road.
That said, most business operations involve some amount of traveling. This could be you or your staff doing bank runs, picking up supplies or doing deliveries to customers. It has to do with the use of personal vehicles for company business and how to fairly reimburse the vehicle owner.
The long and short of it is that traveling costs in terms of time, fuel, insurance, wear and tear on vehicles, etc. These are expenses that companies can claim as a legitimate cost of doing business. There are, however, rules as to how you go about calculating allowable expenses. It’s all about the type of company you are operating. Is your business a corporation or a proprietorship/partnership? Canada Revenue Agency (CRA) has strict rules on how each of these two types of companies can claim travel allowance.
Proprietors and partners need to track total kilometers of all of their personal vehicles used for company business as well as kilometers strictly used for operating the business. Dividing the latter by the former gives a percentage value for company travel. This is multiplied by the total value of all expenses incurred to operate these vehicles as mentioned above. The result is the amount that can be claimed by the company as an expense. Vehicles owned by these companies must be used strictly for company business in order to write off all expenses (e.g. delivery vehicles). Employee use of personal vehicles for company business can be reimbursed in a similar fashion to corporations as indicated next.
Corporations are able to reimburse shareholders and staff for personal vehicle use based on CRA’s table for mileage rates. Here in Ontario, the rate for 2019 is 58¢ per kilometer for the first 5,000 kilometers traveled and 52¢ per kilometer driven after that.
In all cases it is important that owners and staff keep a comprehensive driving log. I know – this is such a nuisance and oh so difficult to enforce. Yet, CRA insists this be done and that these logs be produced in the event of a company audit. Not being able to produce them is at your own peril.
All of this sound confusing? We can help. Just connect and I can let you know how to properly expense personal vehicle use for company travel based on your unique situation.
Travel well, stay safe.