At a loss. Too much bureaucracy

[7Star]

Hi guys,

New to the forum, so bear with me. I tried searching and couldn't find a clear discussion.

I would like to purchase an aircraft to get to remote sites for work. I am curious how other people are structuring this with regards to corporations, tax and the CARS . The layers of bureaucracy and taxes don't make it very straightforward. To complicate things further I'd love to be able to bring my employees or friends and have them contribute to the costs of the flight. I'm sure that the tax man would like me to report my shared flight expenses as income, but that might not look right from TC.

The only people I fear more than TC is the CRA.

Right now I'm thinking to buy the plane within my business, under a private registration, and rent it dry to myself when I want to fly it for personal reasons. That way its still 100% a business aircraft and there is less tax reporting with friends sharing costs.

Would love to hear some of your thoughts.

~Star

[MrWings]

As soon as you use your plane for work and are transporting others for a fee, TC views that as a commercial operation requiring an OC. They don't like that.

If people are doing this, they are doing it under the table and probably won't be posting on an open forum. You might get some DMs.

If I am completely wrong and there is a legit way to do this, I look forward to the responses.

[ICUP]

This is part of CAR 401.28 regarding reimbursement and might be useful for your case:

3) The holder of a private pilot licence may receive reimbursement from the holder’s employer for costs incurred in respect of a flight if the holder

(a) is employed on a full-time basis by the employer for purposes other than flying;
(b) conducts the flight on the employer’s business and the flight is incidental to the execution of the holder’s duties; and
(c) receives a reimbursement that

(i) in the case of an aircraft owned by the holder, is paid at a rate based on distance travelled or number of hours flown and that does not exceed the total of the holder’s direct operating costs and the fees charged against the aircraft in respect of the flight, or
(ii) in the case of a rental aircraft, does not exceed the total of the holder’s rental costs, direct operating costs and the fees charged against the aircraft in respect of the flight.

Not very sure about the CRA side of things though.

[digits_]

To complicate things further I'd love to be able to bring my employees or friends and have them contribute to the costs of the flight. I'm sure that the tax man would like me to report my shared flight expenses as income, but that might not look right from TC.

Looks like this would be a private flight, in which cost sharing is allowed by TC.
A pure pleasure flight that is. Flying from A to B for a work trip and having your passengers pay would likely not be allowed.

Right now I'm thinking to buy the plane within my business, under a private registration, and rent it dry to myself when I want to fly it for personal reasons. That way its still 100% a business aircraft and there is less tax reporting with friends sharing costs.

Would love to hear some of your thoughts.

~Star

Have a look at this: https://www.canada.ca/en/revenue-agency ... craft.html

Depending on which option you would qualify under, it might get expensive. Best to find an accountant that has dealt with private aircraft-which-are-not-milllion-dollar-jets.

[photofly]

Hi guys,

New to the forum, so bear with me. I tried searching and couldn't find a clear discussion.

I would like to purchase an aircraft to get to remote sites for work. I am curious how other people are structuring this with regards to corporations, tax and the CARS . The layers of bureaucracy and taxes don't make it very straightforward. To complicate things further I'd love to be able to bring my employees or friends and have them contribute to the costs of the flight. I'm sure that the tax man would like me to report my shared flight expenses as income, but that might not look right from TC.

The only people I fear more than TC is the CRA.

Right now I'm thinking to buy the plane within my business, under a private registration, and rent it dry to myself when I want to fly it for personal reasons. That way its still 100% a business aircraft and there is less tax reporting with friends sharing costs.

Would love to hear some of your thoughts.

~Star

You can get to remote site yourself for work, and deduct the costs of doing so from your income. Just as you could if you hire a car, or drove yourself (and kept track of business mileage.)

You can't fly other people anywhere and collect money from them, unless you were making the trip anyway.

If you're being reimbursed for a share of the costs of a flight, then it's not taxable income. You can still claim your own share of the costs as an allowable expense. But you can't claim as an expense the bit you got reimbursed for.

If you rent a plane dry to yourself, make sure you're covering *all* the costs, and that you charge yourself the HST as well. If an aircraft is used for less than "substantially all" (90%) business flights then it ceases to be a business asset. Ideally charge yourself no less than you would be prepared to hire the aircraft for, to someone else, to avoid the impression that you are receiving preferential treatment.

If an aircraft is owned by a corporation TC doesn't care, except that any fines for enforcement purposes are automatically at 5x the rate they would fine an individual.

If you're honest then there's very little tax benefit to owning a small plane through a corporation. If the corporation is operated for a profit then it needs to file accounts and pay tax on those profits. (And there are severe implications for the cost of your airplane insurance if you intend to do that.) If the corporation is not operated for a profit then you can't reclaim any input tax, and of course there aren't any profits against which to reclaim expenses. Since all the money the corporation spends on running the airplane comes out of your pocket you might as well pay the costs directly.

[7Star]

I think a lot of the confusion is related to clarification of the roles

Who is the pilot, who is the business owner, who is the employee of the business. In reality they're all me. In the spirit of the law there's no major difference but if you interpret these as separate entities there is a huge difference.

Star owns the business, . Star is the president of the Business. Star is also the only person qualified to fly.

Diving into CAR 403...) The holder of a private pilot licence may receive reimbursement from the holder’s employer for costs incurred in respect of a flight if the holder- I really don't care if I'm paid for my work as a pilot from the business, I'm not paid as a pilot I can still be paid dividends from corporation if I want to get money out of the corp, in fact, Id probably have a huge amount of shareholder equity to take advantage of first.

Now Star (Person) needs to get on site to do some work. How to move the money from Star person, to the business without it violating any CARS.
Situations I've considered:

Lets say the business owns the plane and covers 100% of its operations costs.

1) The business, charges the individual for the flight itself for a profit (Most likely a violation)
2) The business, charges the individual for the flight itself without a profit( Still probably a violation)
3) The business, charges the individual for renting the aircraft wet with (likely OK and easiest from accounting)
4) The business, charges the individual for renting the aircraft dry with (likely ok)
5) The business conducts a training or maintenance flight, operations costs are still incurred, I'm still flying but no money is moving into business
6) The business, flies its employees to a site, it charges a customer for work done at the site. The pilot is a CPL. No AOC (Getting more questionable, but I interpret this as ok)
7) The business, flies employees, and public incidental to the flight to the site for work, the public contributes to cost of flight, No AOC, (Probably not allowed.

Lets say the person owns the plane:

1) Flies for business reasons, deduct cost from income on personal taxes ( OK)
2) Flies for personal reasons, don't deduct costs from taxes (OK)
3) Flies friends incidentally, friends contribute to costs not exceeding direct operating costs (OK)
4) Flies employees of a business they are also employed by,not incidentally, profit (Not ok)
5) Flies employees for a business, they are also employed for,not incidentally, reimbursed by business not exceeding direct costs (ok)


Would love to hear your thoughts or some of your own scenarios.

Cheers,

Star

[digits_]

Do you have an estimate how many hours you'll fly a year purely for business reasons, and how often you would fly privately?

[photofly]

I think a lot of the confusion is related to clarification of the roles

Who is the pilot, who is the business owner, who is the employee of the business. In reality they're all me. In the spirit of the law there's no major difference but if you interpret these as separate entities there is a huge difference.

Star owns the business, . Star is the president of the Business. Star is also the only person qualified to fly.

Diving into CAR 403...) The holder of a private pilot licence may receive reimbursement from the holder’s employer for costs incurred in respect of a flight if the holder- I really don't care if I'm paid for my work as a pilot from the business, I'm not paid as a pilot I can still be paid dividends from corporation if I want to get money out of the corp, in fact, Id probably have a huge amount of shareholder equity to take advantage of first.

Now Star (Person) needs to get on site to do some work. How to move the money from Star person, to the business without it violating any CARS.
Situations I've considered:

Lets say the business owns the plane and covers 100% of its operations costs.

1) The business, charges the individual for the flight itself for a profit (Most likely a violation)
2) The business, charges the individual for the flight itself without a profit( Still probably a violation)
3) The business, charges the individual for renting the aircraft wet with (likely OK and easiest from accounting)
4) The business, charges the individual for renting the aircraft dry with (likely ok)
5) The business conducts a training or maintenance flight, operations costs are still incurred, I'm still flying but no money is moving into business
6) The business, flies its employees to a site, it charges a customer for work done at the site. The pilot is a CPL. No AOC (Getting more questionable, but I interpret this as ok)
7) The business, flies employees, and public incidental to the flight to the site for work, the public contributes to cost of flight, No AOC, (Probably not allowed.

Lets say the person owns the plane:

1) Flies for business reasons, deduct cost from income on personal taxes ( OK)
2) Flies for personal reasons, don't deduct costs from taxes (OK)
3) Flies friends incidentally, friends contribute to costs not exceeding direct operating costs (OK)
4) Flies employees of a business they are also employed by,not incidentally, profit (Not ok)
5) Flies employees for a business, they are also employed for,not incidentally, reimbursed by business not exceeding direct costs (ok)


Would love to hear your thoughts or some of your own scenarios.

Cheers,

Star

I think a lot of the confusion is in your own head, because you're making this waaaay too complicated.

A business can't charge anyone for a flight, or fly its customers around (whether they pay for the flight specifically or for some other service, and the flight is "free".)

A business can own a privately registered aircraft and fly its own employees around, for business purposes, without a part 7 OC, unless it's a "large plane" in which case a private operator registration document is required under part 604. If it's part of someone's job to do this flying employees around, that person needs a CPL. If it's a director who flies employees around, it's arguable they can do this with a PPL, unless they are also an employee of the company.

If anyone connected to the business (like the director) is flown around in a business airplane, they have to pay the costs plus the pro-rata operating expenses of the airplane otherwise they incur a taxable benefit.

Transport Canada will not let you fly the public around in any airplane, without an OC.

For example, a lodge can own a plane to fly its own staff around and move its own equipment. That plane can be privately registered and flown by an employee who holds a CPL. They can't put a member of the public in the plane (unless it's entirely without charge) or their customers in the plane.