I have a client who started a business and had costs of +-R150k over a 15 month period and only in the following year managed to secure approx R3m of business. I would like to know if the costs are allowed to be claimed as a loss and brought forward to th
Important:
This answer is based on tax law year ending 28 February 2017.
Answer:
The general principle is that a deduction can only be made if the taxpayer carries on a trade and then the deduction can only be made against the income derived from the trade. From the facts it is possible that the trade has not commenced yet. Section 11A of the Income Tax Act deals with expenditure (and losses) incurred prior to the commencement of any in preparation for carrying on a trade. These expenses are accumulated and can only be deducted when income is derived from the trade.