Tax consequences of day trips undertaken for business reasons

Qualifying subsistence allowances are excluded from taxable income in terms of section 8(1)(a)(ii) of the Income Tax Act, provided that the employee was instructed to incur costs by his/her employer. But what would happen if the employee incurs costs whilst on a day business trip (such as purchasing lunch, making use of an Uber, buying a Gautrain ticket, paying airport parking, etc)? Due to the fact that the employee was not explicitly instructed by the employer to incur these expenses, the reimbursement thereof will be subject to tax in the employee’s hands.

The proposal is that the reimbursement of these expenses incurred by the employee (in respect of meals and incidental costs incurred in the furtherance of the employer’s trade) will be excluded from the taxable income of the employee, provided that the employer’s policy provides for and allows such reimbursement. This will be the case even if the employee is obliged to spend a part of a day away from his/her usual place of work (in the case of day trips undertaken for business reasons) and not only for business trips requiring an overnight stay.

This amendment comes into operation on 1 March 2021 and is applicable to years of assessment commencing on or after this date.

Webinar Commentary

For more information about this and other amendments view our webinar on Annual Tax Update 2020-2021 here.

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