Welcome to this month's edition of Financially Fit! Our goal is to provide you with current articles on various tax and business topics. The articles are intended to keep you up to date on trends and issues that may impact your business and personal financial affairs. Please contact us if you have questions about any of the issues discussed.

What automobile expenses can be claimed by an employee?

If your vehicle is used for employment purposes, you may be able to claim a deduction for some of your expenses. However, if this is the case, beware - the rules governing automobile deductions are extremely complex and cannot be covered here in any great detail. In order to be entitled to claim vehicle expenses your employer must complete Form T2200 to certify that you are required to use your vehicle in the course of your employment duties. Expenses must first be split into two categories - those that are subject to specific dollar limitations and those that are not. Depreciation and leasing charges are subject to specific dollar restrictions. In general, the amount you can claim with respect to these expenses depends on when the vehicle was acquired. Detailed records should be kept regarding a vehicle's business and personal use. These records must be accurately maintained to support the percentage claimed for business use if the tax department ever calls it into question. Keep in mind that it is the CCRA's position that travel between a taxpayer's regular work location and home is considered personal.

Taxation of Non-Competition Payments

A recent Federal Court of Appeal case, Manrell vs The Queen, has concluded that a taxpayer who receives a non-competition payment on the sale of shares does not have to pay tax on the amount received. This is a very significant decision, since it now opens up the possibility for a portion of the proceeds on the sale of the shares of a business to be received tax-free. However, even though this court case states that non-competition payments are not taxable, it does not mean the total proceeds on the sale of shares can be treated as a non-competition payment. It is important to ensure that a reasonable amount is being allocated for the shares and a reasonable amount is allocated as a non-competition payment. Also, there should be some basis on which to argue that the purchaser would want to make such a payment. For example, the taxpayer's knowledge of the business and the nature of the business are such that the purchaser would not want the taxpayer to compete with him.

If you are thinking of selling your shares in a company, you should consider whether a portion of the purchase price could be allocated to a non-competition agreement.

What's the penalty for missing the deadline to file my personal taxes?

You should always send in your tax return by the annual deadline. Even if you'll have a balance owing that you can't pay right away, you should still file on time to avoid the late-filing penalty.

The late-filing penalty is 5% of the balance owing and an additional 1% of the balance owing for each full month that your return is late. This is up to a maximum of 12 months. And if this isn't the first time you've missed the deadline the penalty may be higher yet.

If you missed the tax-filing deadline because of circumstances beyond your control, contact Revenue Canada and they may waive the penalty and applicable interest.

FUN STUFF - remember this is coming from an Accountant!!!

http://www.bankofcanada.ca/en/inflation_calc.htm

I found this calculator at the bank of Canada web site and just for fun I thought I would include it this month for you to see how you are hedging inflation. Example: put the cost of your home and when you purchased it, and compare it to today's dollars and its market value. (Good news?)

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