Personal Finance

IT Contractor lease a car

  • Last Updated:
  • Jun 27th, 2018 4:10 pm
[OP]
Newbie
Aug 5, 2009
94 posts
Markham

IT Contractor lease a car

Hey guys,

Any IT contractor here lease a car under their own company's name?
How do you justify this to CRA?
Can we say its 100 % for business purpose only even you office is your home?

Thanks
10 replies
Sr. Member
Nov 6, 2015
745 posts
352 upvotes
Guelph, ON
Car expenses are generally based on % you use for your business. You should keep a log book of your mileage when it is used for business. If you drove 10K for the year and 2K was for business, then 20% of your car expenses can be used for your business.
[OP]
Newbie
Aug 5, 2009
94 posts
Markham
but do you lease under compnays name or personal?
Deal Addict
User avatar
Mar 31, 2009
1123 posts
683 upvotes
Is it your only vehicle?

If you only have 1 vehicle, it would be extremely difficult to justify to CRA, under audit, that you use it 100% for business purposes.

If you have multiple vehicles and you have to visit clients a lot, that's different.

However, usually it works out fairly well to call it a personal vehicle, log your KM, and give yourself an allowance for personal vehicle use. For example, if you had a personal vehicle that you drove 5,000 km for business purposes (with a log to back it up) and gave yourself an allowance of 5000 X .54 = $2700 (expense) CRA would likely not have any argument with that as long as it seemed reasonable in the big picture. (ie. if you did $50,000 worth of sales and had a vehicle expense of $2700 calculated in this way, with a log to back it up, no one is going to refute that. But if you only had gross sales of $5000 and claimed a $2700 vehicle expense, even if you had a log, it would start looking so unreasonable that it could be denied)

If you have a corporation, the problem with owning a vehicle in the corporation (especially if it's your only vehicle) is that the vehicle benefit, standby charge, etc for personal use of a business owned vehicle starts to add up really fast. You're better off owning it personally and paying for it personally - and charging the business for use of it (in the method stated above) than owning it in the business and charging yourself a personal vehicle benefit and standby charge.

If it's just a proprietorship, I don't know why you'd specifically want the vehicle to be in the 'business' name' so it may as well be personal. Since a proprietorship is not a legal entity and it's all personal anyway.

So in either case, the vehicle is best in your name and charging an expense to the business based on logs and 54 cents /km for the first 5000 km,
[OP]
Newbie
Aug 5, 2009
94 posts
Markham
Thanks for your explanation!!!
So if lease the car for like 900 a month for personal
I said 60% for business purpose. I can charge company 900x 0.6 = 540?? as long as below 800?
And all other fees I can also charge for 60% as well?
Sr. Member
Nov 6, 2015
745 posts
352 upvotes
Guelph, ON
bombers408 wrote: but do you lease under compnays name or personal?
Since you call yourself a "contractor" I assume you are a sole proprietor in which case there is no distinction between you and your "company", so it makes no difference. If you are in fact incorporated than I can not answer as I've never gone that route.
Deal Fanatic
Oct 1, 2004
6145 posts
601 upvotes
Toronto
Op need an good accountant... or face a huge tax bill years later...
Newbie
May 8, 2018
6 posts
1 upvote
I've done the math on this a couple times, and it always works out better to just lease it personally and charge mileage back to the company. The per kilometer rates are actually generous.

Doing this avoids any potential headaches with the standby charge as well, and keeping a mileage log is less work than apportioning all the related expenses (for which you'd need receipts). There are great apps for logging mileage automatically. I use MileIQ, it's fantastic.
Deal Addict
Jul 3, 2006
1960 posts
576 upvotes
dmacdonal9 wrote: I've done the math on this a couple times, and it always works out better to just lease it personally and charge mileage back to the company. The per kilometer rates are actually generous.

Doing this avoids any potential headaches with the standby charge as well, and keeping a mileage log is less work than apportioning all the related expenses (for which you'd need receipts). There are great apps for logging mileage automatically. I use MileIQ, it's fantastic.
You still need mileage log
Deal Addict
Jan 15, 2017
2900 posts
2246 upvotes
bombers408 wrote: Thanks for your explanation!!!
So if lease the car for like 900 a month for personal
I said 60% for business purpose. I can charge company 900x 0.6 = 540?? as long as below 800?
And all other fees I can also charge for 60% as well?
Here's a great starting point. https://www.canada.ca/en/revenue-agency ... enses.html

Just understand that you cannot arbitrarily say that 60% use was business. It has to be actual business use as defined by CRA. Remember also that the CRA has the income tax reports of thousands and thousands of IT Contractors so it knows what the average use should be for someone in your situation. Claim above that and you can expect to have to provide proof to the CRA.
Deal Addict
User avatar
Sep 19, 2013
2273 posts
765 upvotes
Winnipeg
bombers408 wrote: Hey guys,

Any IT contractor here lease a car under their own company's name?
How do you justify this to CRA?
Can we say its 100 % for business purpose only even you office is your home?

Thanks
Wait, you say you have a home office? Or you use the car only for going to office?
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