All or Substantially All – What Does It Mean?

Volume No. 05-04

“CRA’s interpretation may not be same as the Tax Court’s..”

There have been a number of recent cases discussing what the phrase “all or substantially all” means. [Keith — 2004 TCC 793]; [Keefe — 2003 DTC 1526]; [McKay — 2001 GTC 208]; [Ruhl — 98 GTC 2055].

In a number of publications, the CRA has held that the phrase “all or substantially all” means 90%. This phrase is used in a number of places throughout the Income Tax Act. The most notable instances are as follows:

  • Eligibility for reduced standby charge;
  • Qualification as a small business corporation;
  • Qualification as a qualify small business corporation;
  • Determination of excluded property for FAPI purposes.

The courts have clearly stated that even though it is the CRA’s policy that “all or substantially all” means 90%, this rule must be an “elastic not formulaic application.” In other words, as per the courts, the rule is not 90%. A careful consideration of all the facts must be looked at in order to determine if the “all or substantially all” test has been met. In the Keith case, the judge stated that even though there was some personal use of a vehicle that brought the business use below 90%, he concluded that the taxpayer did meet the test that all or substantially all of his business use of the car allowed him to receive the reduced standby charge. In the Ruhl case, the judge stated that “80% is in my view substantially all of the time.”

On a practical basis, it is still advisable to use the 90% test. However, there may be situations where the “all or substantially all” test can be met even though the business use is less than 90%. Obviously, the further away from 90% that the taxpayer is, the harder it will be to argue that the “all or substantially all” test has been met. We would also caution that CRA will still apply the 90% test since that is what it stated in all of their material. This could mean that any time the issue of the 90% test exists, the only way that a taxpayer may be able to win is to go to court.


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