Tax break ‘benefits elite’

ALLOWANCES: CONCERNS ABOUT NARROW INTERPRETATION FOR HOME OFFICE DEDUCTION

Large percentage of employees won’t be able to claim for their expenses.

The South African Revenue Service (Sars) has issued its draft interpretation note on what taxpayers who are “in employment or holding an office” can deduct for home office expenses.

The 17-page note gives numerous examples of when expenses will not be permitted.

In response, the South African Institute of Taxation (Sait) says a large percentage of employees who were required to work from home during 2020 will be unable to claim a deduction for their expenses.

“We are of the view that the draft interpretation note does not adequately address the tax implications resulting from the increase in home office use due to the Covid-19 pandemic,” says Keitumetse Sesana, tax technical specialist at Sait.

Sars’s interpretation does not align with National Treasury’s intention expressed in the February Budget Review, the institute adds. Treasury indicated that it would review the current travel and home office allowances to investigate their “efficacy, equity in application, simplicity of use, certainty for taxpayers and compatibility with environmental objectives”.

Sait is concerned about Sars’ interpretation of what constitutes regular and, particularly, “exclusive use” of the home office.

In one ‘‘of the examples, an employee who works from home on a permanent basis will not be able to claim his expenses since he conducts his work from the dining room table.

Sars even provides an example that where the children use the home office as a playroom in the afternoons or over weekends the taxpayer cannot claim home office deductions since it is not “exclusively” used for trade.

“It is only in exceptional circumstances that each member of a household working from home will have a dedicated home office available to them,” says Sesana.

The effect is likely to be that only the elite group of taxpayers – those who are in a position to establish a home office that is regularly and exclusively used for purposes of their trade – will benefit.

“In the case of the majority of taxpayers, where a home office is available, this will generally be shared by all members of the household at some stage,” says Sesana.