An anonymised composite: an agent claimed 88% business use on their vehicle with no logbook. The CRA review cut the deduction by $3,550 — and the fix that finally held up was the CRA’s own simplified-logbook method, run by the book the following year.
At a glance
A commissioned agent claimed vehicle expenses on their 2024 T2125 return: $14,200 in total operating costs — fuel, insurance, maintenance, and lease payments — at a claimed 88% business-use rate, for a deduction of $12,496. No logbook had been kept during 2024; the 88% figure was the agent’s own estimate, based on a general sense of how much driving was for showings versus personal use.
CRA selected the return for review and requested support for the vehicle-expense claim. The relevant CRA guidance is direct about what “the best evidence” looks like: “an accurate logbook of business travel maintained for the entire year, showing for each business trip, the destination, the reason for the trip and the distance covered.” The agent had none for the year under review — only a general recollection, two service-invoice odometer readings roughly eleven months apart, and a partial appointment calendar for part of the year.
At the claimed 88% of $14,200, the deduction was $12,496.00. Working from the odometer readings and the partial appointment calendar — the closest thing to reliable secondary evidence available — the CRA reviewer accepted a reconstructed business-use rate of 63%, producing a supportable deduction of $8,946.00. The difference, $3,550.00, was disallowed and added back to income for the 2024 tax year, plus the arrears interest CRA charges on any reassessed balance.
ITA s.230(1) requires every person carrying on a business to keep records and books of account sufficient to verify what is claimed; it does not itself set a logbook format, but CRA’s administrative practice for motor vehicle expenses is built entirely around one, because only “the part of the expenses that you paid to earn income” is deductible, and without a contemporaneous record, that part is exactly what is in dispute. Reconstructed secondary evidence can support a claim, but it does not carry the weight of a real logbook — which is why the reconstructed rate came in well below the agent’s original estimate.
Had the agent kept even the CRA’s simplified logbook method for 2024 — a full 12-month base-year log kept once, then a three-month sample logbook in later years, valid as long as usage “is within the same range (within 10%) of the results of the base year” — the 88% claim, or whatever the real figure turned out to be, would have been fully defensible from a few months of records rather than reconstructed after the fact from odometer readings and a partial calendar. The $3,550.00 add-back was the direct, measurable cost of not having started that logbook a year earlier.
The tell was the review request itself landing on a year with no logbook at all — not a bad estimate, since 88% may well have been close to the truth, but an estimate with nothing behind it. A logbook does not need to start the day CRA asks for one; the CRA’s own base-year-plus-sample structure only works if the full 12-month log comes first, which means the right time to start is well before any review, not after.
The agent accepted the reassessment for 2024 and started a full 12-month logbook for 2025, the CRA’s required base year: quarterly business-use figures of 74% (Jan–Mar), 69% (Apr–Jun), 58% (Jul–Sep) and 83% (Oct–Dec), establishing an annual business-use rate of 72% for 2025. In 2026, rather than keep a full logbook again, the agent ran a three-month sample from April to June, showing 66% business use. Applying the CRA’s own formula — sample-period percentage divided by the base year’s same-period percentage, multiplied by the base-year annual percentage — gives (66 ÷ 69) × 72 = 68.87%, rounding to 69%. That falls comfortably inside the CRA’s allowed band of the 72% base-year figure plus or minus 10 percentage points (62%–82%), so the calculated 69% stood without further sampling. On 2026’s $15,100 in vehicle operating costs, that produced a $10,419.00 deduction — smaller than the original 88% claim would have produced, but this time built entirely from records that would survive a second review. The full 12-month 2025 logbook itself has to be kept for six years from the end of the tax year it last supports, per CRA’s own retention rule, matching the six-year retention period ITA s.230(4)(b) sets for records generally.
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