On the payslip (income) received a travel allowance and on then a deduction side (petrol used). On the IRP 5 code 4582 a deduction of 80% of travel allowance. A tax payer submit a claim per fixed formula? Can a tax payer submit a claim against actual cost
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
The guidance we provided was sufficient, unless we don’t understand, or have all the facts. In the first request you said that the “taxpayer used a company vehicle for business trips but the employer doesn’t add the vehicle fringe benefit to the tax payer's income and he received a travel allowance”. This implied that the employee was entitled to also use the motor vehicle for private purposes. The guidance we gave was based on that understanding.
You are now saying that there is no private use – solely for employer business travel. That means that there is no Seventh Schedule (taxable) benefit and the IRP was correct in that respect.
Paragraph 7(8), of the Seventh Schedule, allows for a reduction in the value of the taxable benefit to be made where “accurate records of distances travelled for private purposes in such vehicle … are kept and the employee bears the full cost of” fuel in this instance. It reduces the amount of the taxable benefit of the private use.
What we said was therefore correct: We said the “allowance is then a reimbursive one and the employer should have reduced it on receipt of the proof (from the employee concerned) of having incurred the expense. If not, the individual will claim the expenses on assessment, but the allowance must then not be a travel allowance. It is probably because of this that SARS is asking for the agreement.”
We suspect that the employer treated the amounts charged to the petrol card in terms of binding general ruling 23. It reads as follows:
“Recipients who are provided with principal-owned petrol or garage cards are regarded as having “borne the full cost of the fuel” if the full amount expended on that card during the year of assessment is included in the recipient’s travel allowance and is taxed as remuneration.”
“In these circumstances, a recipient will be entitled to claim the “fuel cost” element as a deduction against the travel allowance.”
As there is no private travel, no reduction can then be made – “the full cost of fuel for private use of such vehicle” was therefore not borne by the employer.
With regard to the employer owned vehicle, the practice generally prevailing, agrees with our view and reads as follows:
“The receipt of the allowance does not alter the fact that the employee has borne 100% of the expense. The allowance is fully taxable without any allowable deductions, however when calculating the value of private use for the company car fringe benefit, an employee may be entitled to claim a deduction if the employee does not receive any reimbursement (full or partial) from the employer.”
We are still of the view, and that is based on the fact that there was no private use, that the petrol card amounts should not have been reflected as an allowance. You mention that the payslips reflect “Petrol card in” (as remuneration) and “Petrol card out” (under deductions). This means that the there is no actual ‘benefit’ to the employee (no receipt of an amount). We don’t know why it was reflected on the IRP5 and believe that the IRP5 is not correct (and should be amended). If not, in other words there was an amount paid to the employee, no reduction is possible.
Employee owned vehicle:
We don’t understand what “on then a deduction side (petrol used)” means. In any event, if this relates to a garage or petrol card, the binding general ruling applies. The employee is effectively then deemed to have borne the fuel expenses.