Page 357 - SAIT Compendium 2016 Volume2

IN 20 (6) Income Tax acT: InTeRPReTaTIon noTes IN 20 (6)
4. Application of the law
4.1 Registered learnership agreement
4.2 Requirements for the deduction of the annual allowance
4.3 Requirements for the deduction of the completion allowance 4.4 Enhanced allowances – learners with a disability
4.5 Prohibition of learnership allowances
4.6 The quantum of the annual allowance
4.6.1 For 12 full months during any year of assessment
4.6.2 For each period of less than 12 full months during any year of assessment 4.7 The quantum of the completion allowance
4.7.1 Learnership agreements for less than 24 full months
4.7.2 Learnership agreements equal to or exceeding 24 full months 4.8 Substitution of employers
4.9 Termination of the learnership agreement
4.10 Reporting requirements
5. Case study
6. Conclusion Annexure – The law
Preamble
In this Note unless the context indicates otherwise –
• ‘annual allowance’ means a deduction granted under section 12H(2) during any year of assessment in which a learner
is a party to a registered learnership agreement;
• ‘completion allowance’ means a deduction granted under section 12H(3) and (4) in a year of assessment in which a
learner successfully completes a learnership;
• ‘section’ means a section of the Act; and
• ‘SETA’ means a sector education and training authority established under the Skills Development Act;
• ‘Skills Development Act’ means the Skills Development Act 97 of 1998;
• ‘the Act’ means the Income Tax Act 58 of 1962; and
• any other word or expression bears the meaning ascribed to it in the Act.
1. Purpose
This Note provides clarity on the interpretation and application of section 12H which provides deductions for registered learnership agreements. The amendments to section 12H by the Taxation Laws Amendment Act No. 43 of 2014 have been taken into account in this Note and are effective from 20 January 2015 and applicable to all learnership agreements entered into on or after thatdate.
2. Background
Section 12H provides additional deductions to employers for qualifying learnership agreements. These additional deductions are intended as an incentive for employers to train employees in a regulated environment in order to encourage skills development and job creation. Training contracts that qualify for these deductions are learnership agreements and apprenticeships registered with a SETA. These additional deductions consist of an annual allowance and a completion allowance.
3. The law
The relevant sections of the Act are quoted in the Annexure.
4. Application of the law
Section 12H provides a deduction to an employer in addition to any other deductions allowable under the Act for any registered learnership agreement if all the requirements referred to in section 12H are met. In some cases more than one employer may be a party to a registered learnership agreement. In such event, only the ‘lead employer’ identi ed in the learnership agreement may claim the allowances under section 12H.* In practice, the ‘lead employer’ will usually be the employer that pays the learner’s remuneration, although this is not stated in section 12H, and the matter is left to agreement between the employers.
It is not a requirement of section 12H that the employers be registered with the same SETA. The allowance is not linked to the Skills Development Levy† so employers who are not levy payers may still claim the allowance. Two types of deductions are available, namely –
• an annual allowance, to which the employer is entitled in any year of assessment in which a learner is a party to a
registered learnership agreement [section 12H(2)]; and
• a completion allowance during any year of assessment in which the learner successfully completes the learnership
[section 12H(3) and (4)].
* Paragraph (b) of the de nition of ‘employer’ in section 12H(1). † Payable under the Skills Development Levies Act No. 9 of 1999.
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