Can a sales director earn commission? If so, if the commission is 20% of his total remuneration , can home office expenses, vehicle expenses (to and from clients) and accounting fees be claimed against the commission earnings on the assumption that he works from home more than 50% and/or is there a limit on the type of expenses that are deductible? Can salaried employees deduct home office expenses if they work more than 50% of the tax period from home?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Whether or not a sales director can earn commission income is not a tax related request. It is something that is determined from the employment agreement between the individual and the board of directors. The deduction of ‘home office expenses’ is dealt with in section 23(b) of the Act which states that “no deduction shall in any event be granted where the taxpayer’s trade constitutes any employment or office”, are: · where the taxpayer’s “income from such employment or office is derived mainly from commission or other variable payments which are based on the taxpayer’s work performance and his duties” the deduction is only granted if that taxpayer’s duties “are mainly performed otherwise than in an office which is provided to him by his employer”; or · that the taxpayer’s “duties are mainly performed in such part”. As the commission, or other variable payments, don’t exceed 50%, section 23(b)(b)(ii) (the last bullet above) will apply. We agree with your view. Section 23(m) also requires that the “remuneration is normally derived mainly in the form of commissions based on his or her sales or the turnover attributable to him or her”. The deduction of the “vehicle expenses (to and from clients) and accounting fee” is therefore also prohibited.