With Covid-19, many taxpayers are looking to claim home office expenses. This tax claim is, however, subject to quite complex law which only allows claims in very limited instances.
We help many accounting firms and tax practitioners with the more complex parts of tax, and this year we have seen SARS asking more technical tax audit questions. Make sure you and your tax accountant are ready for the following technical questions –
- Employment contract or letter from employer confirming the use of home office (stating why the taxpayer is required to perform work from home as well as whether an office is provided at the employer’s premises).
- Schedule of the home office expenses incurred for the tax period, together with the relevant account statement or receipt issued for each expense.
- Square meters of home office area as well as the total home area square meters, including outbuildings. This can be a complex computation and SARS there is no one-size fits all approach; this depends on the type of expense you are claiming.
- Provide at least one utility bill that indicates the physical address of the home in the event a physical inspection is deemed necessary.
- Provide utility bills in the name of the taxpayer/business showing the physical address of the business, or an affidavit if the property is not owned by the taxpayer, in the event that a physical inspection is deemed necessary.
- Should you claim for the depreciation of an asset being used at your home office which is owned by yourself, SARS will require an employment contract or letter from employer confirming the use of the applicable asset that relates to the depreciation claimed. SARS will also require proof of the asset purchased as well as a breakdown of the calculations of the claim.
The above is not an exhaustive list and therefore taxpayers are warned to keep a strict record of their expenses incurred at their home office. You can also now be guilty of an offence where you do not keep accurate records for 5 years or where you try and defraud SARS with a false claim.
A final word of warning which your tax practitioner or tax consultant can explain. Where you claim home office expenses against income tax, the eventual sale of your property will mean that you cannot claim the whole property for capital gains tax purposes, including primary residency relief, on disposal. Nevertheless, when you do the maths, a home office tax claim still makes good financial sense and is one of the legitimate tax claims which should not be ignored.