The South African Revenue Service (Sars) has issued its draft interpretation note on what taxpayers who are “in employment or holding an office” can deduct for home office expenses.
In the 17-page note it gives numerous examples of when expenses will not be permitted.
In response, the South African Institute of Taxation (Sait) says a large percentage of employees who were required to work from home during 2020 will be unable to claim a deduction for their expenses.
“We are of the view that the draft interpretation note does not adequately address the tax implications resulting from the increase in home office use due to the current, ongoing Covid-19 pandemic,” says Keitumetse Sesana, tax technical specialist at Sait.
Sait is concerned about Sars’s interpretation of what constitutes regular, and particularly “exclusive use”, of the home office. In one of the examples an employee who works from home on a permanent basis will not be able to claim his expenses since he conducts his work from the dining room table.
Sait says many taxpayers do not have the luxury of maintaining a home office that is exclusively used by one member of the household for purposes of that individual’s trade.
If a home office is available, and more than one member of a household is required to work from home, household members will often share the available space.
Sars even provides an example that where the children use the home office as a playroom in the afternoons or over weekends the taxpayer cannot claim home office deductions since it is not “exclusively” used for the taxpayer’s trade.
“It is only in exceptional circumstances that each member of a household working from home will have a dedicated home office exclusively available to them,” says Sesana.
The effect is likely to be that only the elite group of taxpayers – those who are in a position to establish a home office that is regularly and exclusively used for purposes of their trade – will benefit.
“In the case of the majority of taxpayers, where a home office is available, this will generally be shared by all members of the household at some stage, thus falling short of the exclusivity requirement,” says Sesana.
According to Sars it is a requirement that the home office be specifically equipped for purposes of the taxpayer who is claiming the deduction’s trade, and that it be exclusively used for such purposes.
Sars therefore argues that if spouses share the home office space, it would mean that the home office space used by the one spouse would not have been specifically equipped solely for their trade, but also for that of the other spouse.
In addition, since both are sharing the home office space, it cannot be said to have been occupied exclusively for one person’s trade, therefore neither spouse can claim a deduction for home office expenditure.
“As currently drafted, Sars’s interpretation of the legislation is unlikely to recognise the expenses of those who are struggling to make ends meet.”
Sait suggests that the taxman view a taxpayer who works mainly from home to be using the home office regularly and exclusively for purposes of trade while they are actually working in the home office during office hours.
This will allow limited private use of the home office by other members of the household, after hours or over weekends.
Sait also suggests that Sars permit spouses or partners sharing a home office to each claim a percentage of the allowable expenditure incurred in connection with the premises, assuming that the home office is specifically equipped for the purpose of each taxpayer’s trade.
Need for user-friendliness
Given that the majority of taxpayers – whether they earn a salary or commission – incur additional costs over and above property-related expenses because of their working from home arrangement, Sait recommends that the draft note include and allow for a more user-friendly manner of dealing with expenses such as phone costs (including the monthly charges), stationery, furniture, and computer and communication equipment.
“We recommend that Sars consider an interpretation of the legislation that will accommodate the deduction of these costs in these unprecedented times, as it appears that the present working from home scenario will continue to be the norm for the foreseeable future,” says Sesana.