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Income Tax Court 1864 75 SATC 233

Tuesday, 04 February 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical


The appellant, an instrument technician and sole trustee of an inter vivos trust, had raised objections against assessments issued by SARS. SARS disallowed the objections and the appeal was dismissed by the Tax Court.


The appellant, an instrument technician, had previously rendered services to clients through a labour broker and later on changed this arrangement in order to provide the services through a trust which he had formed. The appellant was the sole trustee and employee of the trust. 

The appellant worked for certain divisions of a number of affiliated companies and all income from the rendering of such services to those companies accrued to the trust. The appellant was not remunerated for the services he rendered to the trust and no formal agreement was entered into between the appellant and the trust, with regard to the services he rendered to the companies. The appellant, however, transferred income from the bank account of the trust to his own bank account and was not compelled to comply with the trust objectives when he spent the money from his personal bank account.


The court held that a series of transactions was entered into, by the appellant, with the sole purpose of avoiding income tax. The appellant was not compelled to account to the trust at all, even though he had allowed income received from the services he rendered to accrue to the trust and this showed an abnormal state of affairs. The arrangement between the appellant and the trust resulted in abnormal rights and obligations, that would have not been created between persons dealing at arm’s length and it was accordingly held that all four elements of s 103(1) were present in relation to the series of transactions entered into by the appellant. 

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Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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