The Business Of ‘Business Travel’
30 May 2010
Posted by: Author: Steven Jones
The Business Of ‘Business Travel’
What constitutes ‘business travel’ means different things to SARS than to taxpayers…
Now that it has become compulsory for recipients of travel allowances to substantiate their claims by means of a detailed logbook, it has become ever more critical to understand exactly what SARS understands by the term ‘business travel’. The reason for making the distinction is that business travel is claimable, while private travel is not.
So because ‘private travel’ is not claimable, let’s get that one out of the way up front. The obvious forms of private travel include any travel that relates to your domestic activities—going shopping, taking the sprogs to school, and your annual pilgrimage to the coast(thereby rendering the beach "off limits” to those of us living within striking range) are examples that readily spring to mind.The problem comes in with trying to define ‘business travel’.
Take travelling to work, for instance. For the average office slave, the daily three hours of quality time on crowded highways would be seen as part of one’s business travel—but this is not the case.In fact, SARS specifically regards the trip between one’s home and normal place of work as private travel, which is therefore not claimable.
On the other hand, trips that are directly linked to one’s occupation or trade are, without a doubt, claimable as ‘business travel’.Visits to plants by field engineers,appointments by professionals at their clients’ premises, and sales calls come to mind here. Even those in the non-profit sector who receive travel allowances—think of ministers visiting congregants in their homes—can claim such trips as business travel.
However, there is an area of ambiguity that I have yet to find a satisfactory answer for—even from SARS. It relates to the person who has a regular office to which they commute, but are required (on occasion) to go directly from their homes to a client.For instance,when I was an internal auditor during my corporate days, I lived in the South of Johannesburg which meant that most days started with the pain of the daily 22km (and 90 minute) commute to my office in Sandton.
That agonising trip, to add insult to injury, was clearly part of my private travel (according to SARS’ definition). However, one of our plants was located in Vanderbijlpark, which despite being 75km away, it was in the opposite direction to the office and therefore took only 45 minutes. So there was absolutely no way that I was going to go to the office first!
But the obvious question that arises is whether this particular trip is business or private.One SARS official I spoke to maintained that because it was my first trip of the day, originating from my home, the entire 75km should be logged as private.Ditto for the return trip,assuming that I went straight home. However, the waters became a bit murky when I explained that there were days where I finished at lunchtime, and therefore went from Vanderbijlpark back to my office in Sandton.Would that trip be business, or would it be private (being to my normal place of business)? I sure as heck wasn’t going to lose out on claiming what I regarded as legitimate business travel!
Sense however prevailed when I spoke to another official, who was a lot more understanding considering that their role as a SARS VAT auditor often put them in a similar situation to that which I found myself in.
His approach was as follows:when working in the office, the trip between home and work was logged as private.However, when he went directly to a client, he logged the trip as business, but subtracted the distance that he would have travelled to his normal place of work.If the trip to the client was less than his normal distance to the office, it would therefore be logged as private.
In his experience SARS had never raised any queries regarding this approach, but then they wouldn’t audit one of their own,would they? I think that the latter approach is a more pragmatic and fair one.However, with log books now becoming compulsory, SARS is likely to subject travel claims to closer scrutiny, and it will be interesting to see if a firm ruling will emerge concerning this issue.
Income Tax Act, Section 8(1)(b)
b) For the purposes of paragraph(a)(i)(aa)-
i) 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 place of residence and his place of employment or business or any other travelling done for his private or domestic purposes), be deemed not to have been actually expended on travelling on business, ...
Source: By Steven Jones (Tax Breaks)