ETI - employees who resign before 1 October 2013 and return to the employer afterwards
11 February 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I have an employment tax incentive (ETI) audit for one
client and I am very concerned about the finding and a possible "loophole”/
area of confusion in the act that is now a reality. In a nutshell SARS wants to
adjust an ETI claimed for an employee because they say the employee was
employed before 1 October 2013.
Facts of Situation:
Employee was employed by this
employer before 1 October 2013 BUT he resigned and was re-employed a few months
later. There was a break in employment for a period of two months the employee
was however re-employed in the same tax year.
I am confused because the ETI
Act doesn’t talk about "new” employees.
Section 6 only talks about:
"(e) - was employed by the
employer or an associated person on or after 1 October 2013 in respect of
employment commencing on or after that date”
The National Treasury
guide/explanatory notes for the ETI does not talk about the situation where
employees resign and return a few months later. I can’t find any
disqualification for this exact situation, i.e. nowhere does it say that an
employee is disqualified if that employee has ever worked for that employer
previously/ before 1 October 2013.
This is going to cause some
confusion and I am not sure what to do. This problem would flow onto casual
employees, temporary or contract employees, seasonal workers etc.
Please could I have some
assistance/clarity. I haven’t mentioned all the other problems that this
ambiguity or lack of clarity from SARS/National Treasury would cause in reality
in terms of payroll/hr management.
A: We agree that the current
section 6 of the Employment Tax Incentive Act does not prohibit a person who
was previously employed before 1 Oct 13 and again employed after 1 Oct 13 to be
a "qualifying employee”. The current wording in s6(e) is different to the
wording in the draft ETI bill which at such time did in fact (see below)
restrict the allowance to employees who were employed for the first time at
Draft Bill wording:
e) in relation to the
employer, was not an employee of the employer or an associated institution
prior to 1 October 2013.
Current ETI Act wording:
(e) was employed by the
employer or an associated person on or after 1 October2013 in respect of employment
commencing on or after that date; and
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.