The South African Revenue Service (Sars) remains steadfast that the rules are the rules when it comes to claiming home office expenses, particularly for people who are employed.
It disallowed more than 60% of home office claims during the 2021⁄22 tax year, mainly because people did not qualify in terms of the current legislation or got their calculations wrong.
The flood of claims was understandable since employees and any children attending school and university were forced to work and study from home when the Covid-19 pandemic hit the country.
Although the rules are what they are, Sars is not always right when disallowing home office deductions.
Taxpayers should not be afraid to approach the Tax Board or the Tax Court if Sars has applied the law incorrectly, says Carmen Westermeyer, a facilitator of The Tax Faculty’s monthly tax discussions.
One taxpayer’s experience
Westermeyer highlights the plight of a sole proprietor who cooks meals in her kitchen and delivers them, caters for functions by preparing dishes on her premises, and runs a tuckshop for a club on Sundays but prepares the meals in her own kitchen.
Sars disallowed all her expenses and she was issued with a revised assessment that left her with a huge tax liability.
In this instance the taxpayer was not an employee subject to the restrictions on home office expenses, but a sole proprietor deducting expenses from carrying on a business. The bookkeeper, in preparing her tax return, correctly apportioned all of her expenses between business and private.
Sars repeatedly requested supporting documents, including the details of the tuckshop workers who were not employed by the taxpayer. The documentation was sent and resent, yet “every single expense” was disallowed.
Direct-line to ombud where systemic issues are involved
Westermeyer says in the first instance this taxpayer should consider a complaint to the Office of the Tax Ombud since repetitive requests for the same supporting documents has been identified as a systemic issue at Sars.
This means the taxpayer does not have to go through the normal complaints process by trying to resolve the matter with Sars.
Taxpayers are entitled to approach the ombud directly.
Taxpayers must still follow the initial process
Westermeyer adds that if expenses have been disallowed Sars will have issued a revised assessment, which offers the taxpayer the opportunity to object and appeal the assessment.
“You don’t want to find yourself in a position where you have not followed the objections and appeals process when a revised assessment has been issued. That is your legal recourse to follow,” she said during the discussion on issues relating to home office expenses.
“I have found that as much as it is frustrating in that it feels the taxpayer is making the same argument by submitting the documents again for the objection, and again for the appeal, they will be dealing with different people as they progress through the process.”
This means they will actually be getting a “fresh set of eyes” on their matter.
Westermeyer notes that when Sars issues a revised assessment on the grounds that documents were not submitted when requested for verification purposes, the objections and appeals process is “effectively” reopened when the documents are subsequently submitted.
Once the taxpayer has exhausted all avenues, and if Sars is still sticking to its guns, the taxpayer should consider the Tax Board or Tax Court. “It’s your only real next option,” she says.
Sars makes it clear on its website that in the case of employees (rather than those operating their own enterprises), “generally, the expenditure relating to the rent of, the cost of repairs of and in connection with the premises, is determined on the basis of apportionment”.
The calculation is done by dividing the area that is used regularly and exclusively for trade in the total area of the home times the costs incurred such as rent, rates and taxes, repairs, and electricity.