A taxpayer received a re-imbursive travel allowance that was not taxed. Employer reimbursed the taxpayer at an average of R5.82 per business kilometres travelled. The taxpayer submitted his tax return today and was selected for audit. The IT34 was calculated at a fixed rate of R3.63 & R3.53. Thus a huge amount is now due to SARS. The IT12 form did not allow for any other way to file, how do I fix this and get SARS to allow for amounts as per employee claims to employer? Do I file a correction or will SARS see in the supporting documents the amounts as per the employer payroll system and taxpayer's claim sheets?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
You are correct that “rate per kilometre the employer” at which the employee is reimbursed is irrelevant. This is because the employee was reimbursed at an amount in excess to the rate for the simplified method (or the total kilometres travelled for the year exceeded the limit that applied then). The amount by which the amount reflected on the IRP5 can be reduced, must be based on the actual costs (an acceptable calculation based on accurate data) or the rate per kilometre fixed by the Minister (as you indicated). Both derives part of the amounts from the purchase cost of the vehicle and then requires a log book to prove the actual business kilometres travelled. The simplified method, which doesn’t apply here, or the ability to use the rate per kilometre fixed by the Minister in the relevant Gazette was specifically introduced to cater for employees who don’t keep accurate records. Where the simplified method was not available, it was in fact treated the same as a travel allowance (in a sense). The rate of reimbursement (by the employer) is not Gazetted – it is agreed on between the employer and employee. From the information provided, the quantum of the amounts reimbursed, the simplified method could not be used – see the reasons provided above. I have not have access to the ITR12’s or IRP5’s, but don’t need that. It is possible that the wrong code was used on the IRP5 and that prevented the reduction being made otherwise. It would then not be possible to correct this with request for correction and may require the IRP5’s to be amended (which may be problematic). An objection must delivered. You must remember that the definition of remuneration in paragraph 1 of the Fourth Schedule changed. From the 2019 year of assessment onwards 100 per cent of so much of the amount paid or granted as an allowance or advance referred to in section 8(1)(b)(iii) as exceeds the amount determined by applying the rate per kilometre for the simplified method in the notice fixing the rate per kilometre under section 8(1)(b)(ii) and (iii) to the actual distance travelled is included in remuneration and subject to the withholding of employees tax.
The 2020 SARS guide explains this as follows: This code is only applicable where – · The reimbursement rate used by the employer exceeds the prescribed rate (paragraph 4 of the Fixing of Rate per Kilometre i.e. Motor Vehicle Regulation) and / or · The employee receives any other form of compensation for travel and only in respect of that portion of the reimbursement that DOES NOT EXCEED the amount determined by multiplying the prescribed rate by the actual business kilometres travelled. EXAMPLE- · If the prescribed rate is R3.61/km and the employer reimbursed employee at R4.00/km for 12540 business km’s travelled during 2019 year of assessment, the reimbursive travel allowance must be reflected as follows – o 3702 = R45 269 (R3.61 x 12540km’s) o 3722 = R4 891 ((R4.00 – R3.61) x 12540) This is possibly what happened in your case.