Editorial

• DOI: 10.10520/EJC-1ea62798ad
• Date: 01 June 2020
• Author: Michael Rudnicki
• Published date: 01 June 2020
• Pages: v-vii

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© SIBER INK

Editorial

MICHAEL RUDNICKI

The crazy times we live in have not stopped the authors of this journal

from writing relevant and current material. The intention has always been

to keep the tone as non-academic as possible and to promote content that

is relevant for tax practitioners as well as the business community. This

issue is no different. Many of us have relatives or friends who are battling

with the COVID-19 virus or suffering from the f‌inancial stress caused by our

embattled economy. We wish every one of you strength and prosperity

during these very stressful times.

The f‌irst article in this issue deals with (i) the tax effect of salary reduc-

tions or salary sacrif‌ices; (ii) the tax consequences of the TERS benef‌its; and

(iii) the employees’ tax and provisional tax deferral rules, only applicable

to qualifying taxpayers with turnover of less than R100m.

The phenomenon of appropriately structured salary reductions and

salary sacrif‌ices is accepted by our courts, provided the arrangements are

authentic, in terms of their purpose, and corroborated by meticulous imple-

mentation. A salary reduction must be implemented prior to a contractual

entitlement to income, failing which, the gross amount thereof will be

subject to tax.

The Temporary Employer/Employee Relief Scheme (‘TERS’) provided in

terms of the UIF Act is a mechanism to assist employees where their income

has been reduced as a result of COVID-19. The TERS benef‌it is not subject

to employees’ tax and is exempt from tax in the hands of the employee.

For the period 1 April 2020 to 31 July 2020, employers may limit their

employees’ tax payments to SARS to 65% of the employees’ tax liability. The

remaining 35% must be paid to SARS in six equal instalments commencing

7 September 2020 and ending on 5 February 2021.

Qualifying taxpayers need only pay 15% of their estimated tax liability

in respect of their f‌irst provisional tax payment due from 1 April 2020 to

30 September 2020. The second provisional tax payment due from 1 April

2020 to 31 March 2021 will be based on 65% of the estimated total tax

liability. The balance of the year’s tax payable will be payable when the

third provisional tax payment is due.

The second article deals with two very recent tax cases, Big G and Clicks,

which settle the interpretation of the provisions of section 24C of the

Income Tax Act of 1962. In both cases, the Supreme Court of Appeal held

in favour of SARS, and settled the requirement that expenditure must be

incurred in respect of the same contract that gave rise to its income and not

a related contract. Section 24C deals with the allowance for future expendi-

ture. The section is no longer discretionary in the Commissioner’s favour.