Road Transport Businesses and Truck Drivers
As employers, road transport businesses need to be aware of the status of the truck drivers who perform work for them because an employer's tax obligations vary based on a truck driver's status. Furthermore, incorporated truck drivers need to be aware of the distinctive characteristics of personal services businesses.
A truck driver's status
A truck driver who performs work for a road transport business may be considered an employee or a self-employed person. The determination of a truck driver's status is based on a number of criteria, the most important of which is whether a relationship of subordination exists between the driver and the road transport business.
For example, where a truck driver is free to choose the means of performing a contract and no relationship of subordination exists with respect to the performance of the contract, the driver is considered a self-employed person. For more information about the tax obligations of a self-employed person, refer to the publication entitled Are You Self-Employed? Taxation Reference Tool (IN-300-V).
On the other hand, where a truck driver undertakes for a limited time to do work for remuneration, according to the instructions and under the direction or control of a road transport business, the driver is considered an employee.
Meal and lodging expenses: allowances and reimbursements
As an employer, a road transport business is responsible for withholding Québec income tax from all the remuneration (salaries, wages and any other remuneration) it pays to its employees.
Furthermore, if it pays an allowance to an employee or reimburses the employee for meal and lodging expenses paid by the employee, the business must determine whether or not the amount of the allowance or reimbursement is reasonable. If it is not, the employer must include it in the employee's income. For more information, refer to the publication entitled Taxable Benefits (IN-253-V).
If the employer does not pay an allowance or grant a reimbursement that covers all the meal and lodging expenses assumed by a truck driver, the driver can complete form TP-66-V, Employment Expenses of Transport Employees, to claim in his or her income tax return a deduction for the expenses not covered by the employer. In such a case, the employer must complete Part 2 of the form. For more information, refer to the publication entitled Employment Expenses (IN-118-V).
Personal services businesses
A road transport business may retain the services of a subcontractor. Where the subcontractor is an incorporated truck driver, the corporation formed by the driver may be considered to be carrying on a personal services business (PSB).
Such is the case where an analysis of the facts shows that, but for the existence of the corporation, the truck driver would be an employee of the road transport business receiving the services. The determination of whether a corporation formed by a truck driver should be considered to be carrying on a PSB is based on a number of criteria, the most important of which is the degree of subordination that exists between the corporation and the road transport business.
The tax obligations of a corporation formed by a truck driver as well as the tax consequences for such a corporation vary based on whether the corporation is, in fact, constituted as a corporation or whether it is considered to be carrying on a PSB. For example, a corporation carrying on a PSB is subject to restrictions regarding the expenses it can deduct and cannot claim the small business deduction. For more information, refer to interpretation bulletin IMP. 135.2-1/R1, Personal services business.