Is a monthly maintenance payment deemed taxable in the hands of a third for the benefit of her grandchildren?
Important:
This answer is based on tax law for the tax year ending 28 February 2018.
Answer:
For purposes of the guidance that follows, we accepted that the payments are not made in terms of a maintenance order (the Maintenance Act). We also accept that it is not to be made to the former spouse under a divorce order – see paragraph (b) of the definition of gross income In the Income Tax Act. We also accept that, whilst the taxpayers “is working in the UK” she is deemed to be exclusively a resident of the RSA.
Generally, a bona fide contribution made by the donor towards the maintenance of any person as the Commissioner considers to be reasonable is not subject to donations tax.
The person receiving that, in the capacity of an agent, will also not receive it as gross income. The intention of the parties is important and it is not necessary to do this in a written agreement. Any amount paid in respect of services rendered, will of course be gross income. If there is an actual receipt, it must be dealt with in the return of income of the recipient, even if it doesn’t constitute gross income, but exceeds the thresholds for submitting a return.