[FAQ] Business travel for a sales representative

[FAQ] Business travel for a sales representative

• 26 January 2021
• Individuals Tax
• Piet Nel

Background

A taxpayer operates mainly from her home office as a sales representative where she travels to and from recurring and prospective clients. Her employer also substantiated in a letter that she does not have an office at their premises but does have the use of a desk should she have to make use of it. She only makes use of a desk at the office for ad hoc reporting to management or meetings etc.

Is she allowed to claim travel from her house to the head office as part of business travel?

Answer

The Income Tax Act

You are reminded that SAIT's technical query system policy prescribes that only guidance should be provided in relation to requests submitted. To do otherwise would cause SAIT to compete with its own members. Guidance implies that sources or references relevant to the request are provided, but that ultimately the tax practitioner’s own professional judgment is required to be applied to the specific circumstances. This is therefore not an answer to the question you asked, or a view on the tax position you intend to take.

Section 8(1)(b)(i) is relevant and reads as follows:

For the purposes of paragraph (a)(i)(aa) any allowance or advance in respect of transport expenses shall, to the extent to which such allowance or advance has been expended by the recipient on private travelling (including travelling between his or her place of residence and his or her place of employment or business or any other travelling done for his or her private or domestic purposes), be deemed not to have been actually expended on travelling on business.

The relevant words are the underlined ones, as you indicated. Section 8(1)(b)(i) provides that travelling between a recipient’s place of residence and place of employment is private travel.

Application of the principles

The Income Tax Act doesn’t define the word ‘employment’ and the practice generally prevailing also doesn’t comment on the meaning of the word ‘employment’ in this context. The practice generally prevailing does make the comment that “the term “place of employment” applies when the recipient of the allowance or advance is an employee and the term “place of business” applies when the recipient is a holder of an office.” It then states that the “location of a recipient’s place of employment or place of business is a factual enquiry. In relation to an employee’s place of employment, it is the place at which the employee must render services as agreed with the employer.”

SARS, in the practice generally prevailing, gives the following example:

“Examples of business travel include, where … a computer programmer, is allowed to work from home on a permanent basis (that is, the home office is the place of employment) travels to a client’s premises to discuss system requirements and functionality, the travel from the home office to the clients’ premises.”

Your client bears the onus to prove that the place of business is not at the employer.

Webinar Commentary

Further webinar commentary on Annual Tax Update 2020-2021 can be accessed here.

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