My client paid R435 293 for her vehicle which is principal debt (including a deposit of R50 801). Upon assessment review SARS reduced the travel claim by reducing the value of the vehicle to exclude the deposit of R50 801. Do we have grounds to object to
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
We accept, for purposes of the guidance that follows, it was accepted that you require guidance with respect to the reduction of the allowance that is done under section 8(1)(b) of the Income Tax Act. It is not clear if the taxpayer will be basing this on the basis of ‘accurate data furnished’ – see section 8(1)(b)(iii) or on the rate per kilometre determined by the Minister in the Gazette. The return of income, the ITR12, doesn’t require detail relevant to the ‘Cost Price or Cash Value’ of the vehicle and then provides space for ‘wear and tear’ or lease payments. This is because section 8(1)(b)(iii) (in (aa)) deals with a ‘vehicle that is being leased’ differently to any other vehicle (in (bb)). An ‘HP’, that you refer to, is not a lease.
Section 8(1)(b)(iiiA)(bb)(A) refers to the ‘cost of the vehicle and it excludes, in section 8(1)(b)(iiiA)(bb)(A), finance charges (as you also indicated). It does refer to “the date of original acquisition by that recipient”. We agree that a deposit, or often a trade-in, must not reduce the cost of the vehicle.