[FAQ] Home office expenses

[FAQ] Home office expenses

• 21 October 2020
• Case study: Home office expense
• Piet Nel

Background

A company has staff that have been working from home during COVID19. In total, there are 3 working directors and 4 other staff. They are thinking of creating offices at home for each staff member for the future instead of using one office for all. Due to the type of work they do, it is very convenient for them to work from home. 

Can each individual taxpayer claim a deduction for home expenses against his/her income in the current year and in future?

Answer

The relevant law (relating to the expenditure relating to a study at home) is found in section 23(b) - domestic premises used for trade purposes. It allows as deductions, domestic or private expenses, including the rent of or cost of repairs of or expenses in connection with any premises occupied for the purposes of trade or of any dwelling-house or domestic premises, but that part must be specifically equipped for purposes of the taxpayer’s trade and regularly and exclusively used for such purposes. 

We don’t know what ‘home office expenses’ you refer to – the expenses that can be deducted must be “the rent of or cost of repairs of or expenses in connection with any premises occupied”. 

This must be read with section 23(m) because the individual is in receipt of remuneration. Section 23(m)(iv) is relevant to the deduction which is allowable in this instance. Of course, the expenditure must first qualify for a deduction under section 11(a), (d), 24J, etc. 

Section 23(b) then limits the deduction to the trade part by taking the private part of the expense away (in a sense). 

The law requires that the “part that is so occupied must be specifically equipped for purposes of the trade” and “regularly and exclusively used”. 

The other section 23(b) requirements, where “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” (section 23(b)(ii). 

The second bullet is relevant to your client.

Webinar Commentary

Further webinar commentary on When Can Home Office Expenses Be Claimed And How Should It Be Calculated can be accessed here.

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