Page 626 - SAIT Compendium 2016 Volume2

IN 72 Income Tax acT: InTeRPReTaTIon noTes IN 72
which will also be included in taxable income, is calculated as follows: The monthly value of private use is R400 000 × 3,25%
Annual value of private use (R13 000 × 12)
Less: Business use reduction
= value of private use x business km/total km = (R156 000 × 17 000km / 36 000 km)
Less: Licence cost reduction
= actual costs x private km/total km = (R650 × 19 000km/36 000km)
Less: Insurance cost reduction
= actual costs x private km / total km = (R16 200 × 19 000 km / 36 000 km)
Less: Maintenance cost reduction
= not applicable as Y did not bear the full maintenance costs Less: Fuel cost component
= private km × fuel rate per kilometre per Gazette
(19 000km × R1,193a)
Adjusted value of private use
Less: Consideration
Cash equivalent of the value of the taxable bene t
(that is, the value of the bene t subject to income tax on assessment)
13 000 156 000 (73 667)
(343) (8 550)
(0) (22 667)
50 773 (12 000) 38 773
a As per the cost table in Annexure B.
The cash equivalent is calculated at 3,25% because the motor vehicle was subject to a maintenance plan at the time of acquisition. Y did not incur the full cost of maintenance and may not claim a reduction in respect of any maintenance costs.
4.6 Circumstances under which the value of private use is deemed to be nil
4.6.1 Available for use by employees in general
The value of private use of the motor vehicle by an employee is deemed to be nil, if all three of the following requirements are met:
• The motor vehicle is available and used by employees of the employer in general (that is, the motor vehicle is a pool
car generally used by employees for business purposes and which is not allocated to a particular employee);
• The private use of the motor vehicle by the employee is infrequent or merely incidental to business use; and
• The motor vehicle is not normally kept at or near the residence of the employee when not in use outside of business
hours.
4.6.2 Nature of employee duties
The value of private use of the motor vehicle by an employee is deemed to be nil, if –
• the nature of the employee’s duties are such that the employee is regularly required to use the motor vehicle for the
performance of those duties outside normal hours of work; and
• the employee is not permitted to use that motor vehicle for private purposes other than –
• travelling between his or her place of residence and his or her place of work; or
• private use which is infrequent or is merely incidental to its business.
For this purpose, ‘normal working hours’ are considered to be the regular, usual or typical hours that the employee who is provided with the right of use of the motor vehicle renders his or her services. Normal working hours will, therefore, be different for each person and must be determined with reference to a particular employee’s terms and conditions of employment.
The no-value rule will only apply if the use outside of an employee’s normal working hours occurs ‘regularly’. The Concise Oxford Dictionary* de nes ‘regularly’ to mean ‘done or happening frequently’. What constitutes regular performance of duties outside normal work hours is not standard and must be assessed on a case-by-case basis taking into account the particular job and its responsibilities. A motor vehicle that is only used occasionally outside normal work will not be frequent enough to constitute regular use.
The onus rests on an employer to prove that the requirements for the nil value provisions have been met.
* Concise Oxford English Dictionary. Edited by Catherine Soanes, Angus Stevenson. 11th ed. rev. New York: Oxford University Press, 2006
618 saIT comPendIum oF Tax LegIsLaTIon VoLume 2