Page 483 - SAIT Compendium 2016 Volume2

IN 50 Income Tax acT: InTeRPReTaTIon noTes IN 50
• employment; and
• other broader government objectives; and
• the aggregate expenditure for such activities.
This report will be compiled based on the information submitted as discussed in 9.1.
8.3 Preservation of secrecy
Section 11D (13) requires the Minister of Science and Technology and every person employed or engaged by him or her in carrying out the provisions of section 11D to preserve and help in preserving secrecy with regard to all matters that may come to his or her knowledge in performance of his or her duties in connection with the section.
Both the Department of Science and Technology and SARS understand that certain R&D activities and results may be secret and con dential and that the taxpayer relies on such con dentiality to protect its commercial interests. Under section 11D (13), of cials in the Department of Science and Technology (including the Minister of that department) are required to preserve and aid in preserving the secrecy of information disclosed to them. The secrecy of information disclosed to SARS is protected under section 4.
8.4 Oath or solemn declaration
Section 11D (14) directs every person employed or engaged as contemplated in section 11D (13), to take and subscribe before a magistrate or justice of the peace or commissioner of oaths, an oath or solemn declaration of delity or secrecy as may be prescribed, as contemplated in section 4 (2) (a). Before any of cial of the Department of Science and Technology may act under section 11D that of cial must take or subscribe to the oath or solemn declaration.
If a taxpayer has consented in writing that such information may be published or made known to any person, the secrecy provisions of section 11D (13) shall not apply [section 11D (15)].
9. Offences and nes
9.1 Offences relating to submission requirements — section 11D (16)
Any taxpayer contravening the submission requirements of section 11D (11) will be subjected to the following:
• On conviction the taxpayer shall be liable to a ne or to imprisonment for a period not exceeding 24 months.
• After being convicted, a notice will be sent to the taxpayer by the Minister of Science and Technology requiring the
taxpayer to submit the information for which the offence was committed. The taxpayer will be given a period, which the Minister of Science and Technology deems reasonable, to submit the information. A taxpayer that fails to submit the information after a notice was given to him or her, will be—
• guilty of an offence and liable on conviction to a ne of R50 for each day during which such default continues;
or
• to imprisonment without the option of a ne for a period not exceeding 12 months.
9.2 Offences relating to breach of secrecy provisions — section 11D (17)
The Minister of Science and Technology and every person employed or engaged by him or her in carrying out the provisions of section 11D shall be guilty of an offence and liable on conviction to a ne or to imprisonment for a period not exceeding 24 months if he or she fails to comply with section 11D (13) (the preservation of secrecy provision).
9.3 Failure to take prescribed oath or make solemn declaration — section 11D (18)
Before carrying out the provisions of section 11D, the Minister of Science and Technology and every person employed or engaged by him or her is required under section 11D (14) to take a prescribed oath or subscribe to a solemn declaration of secrecy or delity. If the Minister or that person fails to do so he or she shall be guilty of an offence and liable on conviction to a ne not exceeding R500.
10. Record-keeping
Under section 73A all records relevant to a tax return must be retained by the taxpayer for a period of ve years from the date on which that return was received by SARS. In the context of this Note, taxpayers claiming expenditure under section 11D will need to keep amongst other things—
• records of R&D expenditure claimed under section 11D (1);
• details of assets for which a 50:30:20 allowance has been claimed under section 11D (2), such as dates of acquisition and disposal, description, cost and allowances claimed, copies of instalment sale agreements supporting purchase price;
• details of grants (including government grants) received or accrued to fund R&D expenditure;
• details of related recoupments;
• records which monitor the technical progress of the research and development activities; and
• copies of returns of information submitted to the Department of Science and Technology under section 11D (11). In the event of a tax audit being conducted, taxpayers may be asked detailed questions regarding the research and development activities conducted and records must show that a particular activity has indeed been carried out. The following are typical questions which may be asked:
• • •
What is the R&D activity which has been carried out?
Who identi ed the need for carrying out the activity?
Were any searches or investigations conducted to determine whether such an R&D exercise was necessary in that the results were not available elsewhere?
Was any professional advice obtained?
How are the R&D activities being coordinated and by whom?
•
•
•
•
Project-by-project v departmental allocation of R&D expenditure
SARS’s preference is for R&D costs to be accounted for on a project-by-project basis rather than on a departmental basis. A taxpayer that adopts a departmental basis of allocation will not automatically be precluded from claiming a deduction under section 11D, but should bear in mind that a problem may arise if a particular project does not qualify
Who carried out the R&D activities and at which stages of the project? Is there a separate cost centre keeping account of the R&D expenditure?
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