Taxpayers who find themselves in a loss-making position often intuitively assume that as long as they are not liable to pay tax, they would not be exposed to understatement penalties. The Tax Court recently held that there was prejudice to SARS where a taxpayer who remained in an assessed loss position, even after adjustments by SARS. Taxpayers in assessed loss positions must exercise the same care as any other taxpayer in preparing their tax returns and ensuring that they take reasonable tax positions.

The National Treasury published the Budget Review 2021 on 24 February 2021. This article considers some of the proposals for tax amendments that the National Treasury intends to make as part of the 2021 legislative cycle.

Taxpayers may deduct an allowance for certain future expenditure in terms of section 24C, despite not having incurred the expenditure yet. At the centre of this provision is a requirement that the future expenditure in respect of which the allowance is deducted must, firstly, be funded from the income that arose from a contract and, secondly, be incurred by the taxpayer in the performance of its obligations under such contract. This article reviews some recent case law where these requirements were considered.

Lenders may face increasing difficulty in recovering debts in the current business conditions. The deterioration of the prospects of recovery has tax implications. These implications depend on a number of factors. This article provides a brief overview of the tax considerations that are relevant in respect of bad or doubtful debts.

Debt restructuring arrangements are likely to become more prevalent in the current economic conditions in South Africa.  This article provides an overview of the relevant tax considerations that taxpayers should bear in mind when entering into arrangements that provide debt relief.

Deferred tax reflects the future tax consequences that will arise when an entity’s assets and liabilities realise.  The IFRIC recently considered how an entity should determine the deferred tax implications of an asset if the recovery of the economic benefits associated with it will have multiple distinct tax consequences. This article briefly reviews the IFRIC’s agenda decision and its relevance in South Africa.

Investments in foreign operations often include shareholder loans denominated in foreign currencies. Telkom disposed of such a shareholder loan at a substantial loss. It applied a disposal rate to deduct this as an exchange loss against its taxable income. SARS disallowed the deduction on the basis that it represented a loss that was beyond the scope of section 24I, which deals with gains or losses on foreign exchange transactions. The Supreme Court of Appeal considered this dispute and provided valuable guidance on the interpretation of tax legislation in the process. This article provides a brief review of this aspect of the judgment in the Telkom case.

The Budget Review published by the National Treasury on 26 February 2020 surprised many commentators when no significant tax rate increases were proposed. That document contains specific tax proposals that may have a significant impact on those affected by it. This article reviews a selection of these proposals that taxpayers should be aware of and look out for in the 2020 tax law amendment cycle.

Taxpayers may deduct an allowance for certain obligations to incur future expenditure in terms of section 24C of the Income Tax Act.  This provision has been the subject of a number of recent cases, the latest being C:SARS v Clicks Retailers (Pty) Ltd. In this case the SCA ruled in favour of SARS in relation to the application of section 24C to obligations in terms of a customer loyalty scheme. This article briefly reviews this case and the reasoning followed by the court.