January 29, 2015 at 4:48 pm #383Marican IncorporatedKeymaster
The Deductibility of Business-Travel Expenses and the Submission of Logbooks
Many clients – the taxpayers – have been unsuccessful in claiming business-travel expenses as deductions against taxable income. These grieved client raised their concerns to us in order to obtain clarity on the necessity of providing a travel logbook and to ascertain the legality of their unsuccessful deductions against taxable income. The Tax Help Desk, consequently, undertook the task of investigating the members’ concerns by vigorously interpreting the relevant provisions of the Income Tax Act and by examining the relevant tax case laws in relation to the requirement (or non-requirement) of providing a travel logbook when claiming business-travel as tax deductible expenses.
The experiences at the Marican Tax Help Desk inform us that there are two circumstances under which taxpayers could claim business-travel and related expenses as tax-deductible expenses. These circumstances are as follows:
- The taxpayer is in receipt of travel allowances, or
- The other taxpayer who:
- Incurs travel expenses for the purposes of producing income (typical section 11 (a) of the Income Tax Act claim), or
- Is a commission-earner, or
- Is a sole-proprietor and claims a deduction for travel expenses.
The other taxpayers
So what are the documentary requirements for the other taxpayers who wish to claim business- travel expenses when submitting their IT 12 for 2012?
It is argued that Section 8 (1) does not apply to the following:
- Taxpayers claiming deductions in respect of the production of income (in terms of Section 11 (a) of the Income Tax Act) and
- Sole-proprietors or commission-earners.
An accurate data/record of business travel is, nevertheless, required for the other taxpayers immediately listed above. How do we arrive at such a conclusion? Why are the other taxpayers still expected to supply accurate records of their business-travels when making this claim?
In addition, Section 82 of the Income Tax Act which stipulates that the taxpayer must supply the proof of expenditure which in this situation is the proof of business kilometres travelled.
Taxpayers claiming for business-travel expenses will be met by the decision in `Golby v Secretary for Inland Revenue 1969 (2) SA 377 (A) [31 SATC 59]’ which requires that taxpayers have to prove to what extent they are entitled to deduct certain travelling expenses. The supply of accurate data of business travel and related expenses is indispensable in all cases when claims for business-travel are made against taxable income!
The Income Tax Act is unambiguous that the taxpayer – the claimant of expenses – must furnish proof that the amount claimed by the taxpayer meets all the aforementioned requirements.
What is a logbook?
This briefing note has demonstrated that in order to claim the cost of business travel, taxpayers in all situations must base their claim on the actual business kilometres travelled and are required to prove of the business kilometres travelled to the satisfaction of the Commissioner.
In order to be able to do so, all taxpayer (including recipients of travel allowances) must keep accurate written records of their business travel and include, at a minimum, the following information:
- The odometer reading on the first day of the tax year.
- The odometer reading on the last day of the tax year.
- For all business travel –
– Date of the travel;
– Kilometres travelled; and
– Business travel details (where and reason for trip).
Written records of this information are often referred to as a logbook. It is not necessary to record details of private travel (for example that the taxpayer went to play table tennis on a certain date and a certain number of kilometres was travelled) or daily opening and closing odometer readings.
The taxpayer could use an excel spread sheet to record the aforementioned travel details with relative ease. However, SARS has a logbook which taxpayers may use and that is available on the SARS website. We are aware that in practice, in some cases, a non-SARS designed logbook has been rejected by SARS and that, consequently, deductions have been disallowed. There could be many reasons for these rejections (two reasons for the rejections of logbook have been provided in this brief already – submission of retrospective logbooks and failure to demonstrate that the expenses were undertaken for the purposes of trade), but in principle an excel spread sheet should be an adequate substitute for a SARS-designed logbook. It is wise, though, to use the SARS-designed logbook in order to ensure that the possibility of being denied a valid business-travel tax deduction claim is at a minimum.
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