I have a client that started an Uber business and purchased vehicles to be used in this trade. These vehicles would be used wholly and exclusively for the purpose of trade and there would be no element of private use.
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
The fact that the individual “has an additional vehicle which was used for his ordinary life including his travel allowance” is irrelevant with respect to your request. What is relevant is whether the taxpayer used a vehicle, acquired for the Uber trade, for personal travelling.
A travel allowance, as is any other allowance (or advance), is dealt with in section 8 of the Income Tax Act. It was always, since 1962, included in taxable income, but only the portion of the allowance or advance that SARS is “not satisfied was actually expended by the recipient on such travelling”. The principle is then that the taxpayer doesn’t make a deduction, but the allowance, or the amount to be included, is reduced by the portion expended on business use. No deduction is in any event possible against taxable income. Section 11 states that deductions are made against income.
The individual, we accepted the business is conducted as a sole proprietorship) must base the amount of the deduction on actual costs (section 11(a), (d), (e) and 24J) actually incurred and make an adjustment in terms of section 23(g) for the private use element. The adjustment, under section 23(a) or 23(g), in respect of non-trade related travel, such as private travel, must made and must be based on a log book. The deduction of all qualifying expenses, not only the ones relevant to the vehicles, is made against the ‘income’ derived from the letting thereof (in terms of lease agreements).
Section 11(e) requires that the asset must be “owned by the taxpayer or acquired by the taxpayer as purchaser in terms of an … “instalment credit agreement” in section 1 of the Value-Added Tax Act …” The taxpayer must then use the periods, as published in binding ruling 7, for this allowance. A period of seven years can’t be used.
We agree that, to determine “the extent to which such moneys were not laid out or expended for the purposes of trade”, (section 23(g)), a logbook would be the acceptable basis to apportion. The other expenses, such as for instance the part of domestic premises used, will be apportioned on another basis.
If there is no purpose, other than trade, no apportionment is required.