When claiming a vehicle against a travel allowance on behalf of a taxpayer, I have always used the value of the vehicle to include finance charges. For many years, SARS seems to have accepted this valuation of the vehicle, but recently they have started r
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
To the best of our recollection the cost of a motor vehicle for section 8(1) purposes never included finance charges. It is unlikely that “SARS accepted that” – it is more likely that they didn’t ask for the supporting documents.
Section 8(1)(b)(iiiA)(bb)(A) refers to the ‘cost of the vehicle and it does refer to “the date of original acquisition by that recipient”. The Act then deals with finance charges separately – in section 8(1)(b)(iiiA)(bb)(B).
In the notice in the Gazette, applicable to the 2018 year of assessment, “value” in relation to a motor vehicle used by the recipient of an allowance as contemplated in section 8(1)(b)(ii) and (iii) of the Income Tax Act, 1962, “means—
(a) where that motor vehicle (not being a motor vehicle in respect of which paragraph (b)(ii) of this definition applies) was acquired by that recipient under a bona fide agreement of sale or exchange concluded by parties dealing at arm’s length, the original cost thereof to him/her, including any value-added tax but excluding any finance charge or interest payable by him/her in respect of the acquisition thereof;
(b) where that motor vehicle—
(i) is held by that recipient under a lease contemplated in paragraph (b) of the definition of “instalment credit agreement” in section 1 of the Value-Added Tax Act, 1991; or
(ii) was held by him/her under such a lease and the ownership thereof was acquired by him/her on the termination of the lease,
the cash value thereof as contemplated in the definition of “cash value” in section 1 of the Value-Added Tax Act; or
(c) in any other case, the market value of that motor vehicle at the time when that recipient first obtained the vehicle or the right of use thereof, plus an amount equal to value added tax which would have been payable in respect of the purchase of the vehicle had it been purchased by the recipient at that time at a price equal to that market value.”
Item (b) would apply where the vehicle was held under a lease, and (a) or (c) in all other instances. You’ll notice that it specifically excludes finance charges.