Client is a public sector employee and has a writing and editing practice from home. He attended a coaching course as he intends to offer coaching as well as writing and editing. SARS has disallowed this as an expense. Is there justification in disputing
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
The taxpayer claimed a deduction and SARS disallowed it. The taxpayer is aggrieved by the assessment and therefore is entitled to dispute the assessment.
You have not indicated what the grounds for the additional assessment are. We accept that the deduction was not made against the remuneration derived from the employment (in the public sector), but against the income from the editing practice (a separate trade).
The grounds for the objection should be that it qualifies to be deducted under section 11(a) and is not prohibited by section 23.
The statement that made by you that the taxpayer “would not be able to provide coaching without the course qualification” could imply that it is a pre-trade expense, but that may well create a risk that it is also capital in nature.