We use the BusAuto form to record a client's vehicle expenses. He has two vehicles, so we have two BusAuto forms. This scenario involves a situation where a client has zero business use in the year for one of the the vehicles.
Refer to Chart C of the BusAuto form:
As a simple example, opening UCC is $5,000, CCA is $1,500, and closing UCC is $3,500. Of the $1,500, zero is deductible because business use is zero.
If the business use is 50%, the total CCA is still $1,500 but the deductible portion is $750. Ending UCC is still $3,500.
It seems that CCA is always going to be $1500, but the amount actually deductible depends on the business use.
Ending UCC is always $3500. UCC decreases each year for a personally-owned asset, regardless of business use.
Since Profile calculates it this way, I am inclined to trust it, even though it doesn't seem fair to the client.
This seems to be consistent with T4002, page 81-82.
Is Profile doing this correctly? Am I missing something?
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Does this change if you choose "yes" at the top right of BusAuto, for whether the vehicle is owned by the company?
The reason I want to clarify is because if it was say, a tool in Class 8, and the business did not want to claim CCA, you could zero it out and the ending UCC would be the same as opening (assuming no additions or disposals). In the Class 10 example above, can we zero out the "personal" portion of CCA in years of no activity?
Seems there is less discretion about CCA for a personally-owned vehicle. The UCC will continually diminish whether or not the vehicle is used for business.
The difference is that the automobile is partly personal/partly business use. For a Class 8 asset, it is generally all business. For an asset used partly for business and partly for business, the Column 12 amount on the CCASummary is the total CCA for the asset. That amount reduces the UCC. However, it is not the amount that can be claimed - the amount that can be claimed is split between business use and personal use. This is the only way that CRA came up with when the % of usage varies from year to year. You cannot indicate that the business does not own the asset at the right of the BusAuto screen. If they do not "own" it (which really they do not, the individual does for a proprietorship), then you cannot capitalize it.
Solid answer, thanks.
And there's no "special" rule if the auto is used 0% on business? Whether it's zero, 1%, 50% 99%, or 100%, it's all done the same way?
Page 82 of T4002 uses the example of Jennifer. Too bad CRA didn't take the extra step and confirm the ending UCC. But it's consistent with what Profile is doing.
Basically. It is because the rate of personal vs business use varies from year to year. Obviously, if it goes to 0% and will stay there, you just stop amortizing that vehicle. Otherwise, it is like other auto expenses. Say you paid $1,000 for car insurance. If your business use was 20%, you claim $200. If it was 0%, you claim zero. You don't get to carry forward the amount that you didn't claim to the next year. The amount the vehicle is deemed to have depreciated is calculated full, then the % business use is claimed. You cannot carry the excess amount forward to the next year. At least, I am guessing that is the reasoning.