Your tax and business travel

May 3, 2022 | Articles, Tax

What constitutes ‘business travel’ often means different things to SARS than to taxpayers

 

STEVEN JONES

NOW THAT it has been compulsory for recipients of travel allowances to substantiate their claims by means of a detailed logbook for a number of years, it has become ever more critical to understand exactly what SARS understands by the term ‘business travel’.

The obvious reason for making the distinction is that business travel is claimable, while private travel is not.  So since ‘private travel’ is not claimable, let’s get that one out of the way up front.

The obvious forms of private travel include any travel that relates to your domestic activities—going shopping, taking the sprogs to school, and your annual pilgrimage to the coast (thereby rendering the beach “off limits” to those actually living within striking range) are examples that readily spring to mind.

 

The problem comes in with trying to define ‘business travel’.  Take travelling to work, for instance.  For the average office slave, the daily three hours of quality time on crowded highways would be seen as part of one’s business travel—but this is not the case.  In fact, SARS specifically regards the trip between one’s home and normal place of work as private travel, which is therefore not claimable.

 

On the other hand, trips that are directly linked to one’s occupation or trade are, without a doubt, claimable as ‘business travel’.  Visits to plants by field engineers, appointments by professionals at their clients’ premises, and sales calls come to mind here.  Even those in the non-profit sector who receive travel allowances—think of ministers visiting congregants in their homes—can claim such trips as business travel.

However, there is an area of ambiguity that I have yet to find a satisfactory answer for—even from SARS.  It relates to the person who has a regular office to which they commute, but are required (on occasion) to go directly from their homes to a client.

For instance, when I was an internal auditor during my corporate days, I lived in the South of Johannesburg—which meant that most days started with the pain of the daily 22-km (and 90-minute) commute to my office in Sandton.  That agonising trip, to add insult to injury, was clearly part of my private travel (according to SARS’ definition).

However, one of our plants was located in Vanderbijlpark, which despite being 75 km away, it was in the opposite di-rection to the office and therefore took only 45 minutes.  So there was absolutely no way that I was going to go to the office first!  But the obvious question that arises is whether this particular trip is business or private.

One SARS official I spoke to at the time maintained that because it was my first trip of the day, originating from my home, the entire 75 km should be logged as private.  Ditto for the return trip, assuming that I went straight home.  That hardly seems fair!

The waters became even murkier when I explained that there were days where I finished at lunchtime, and therefore went from Vanderbijlpark back to my office in Sandton.  Would that trip be business, or would it be private (being to my normal place of business)?  I sure as heck wasn’t going to lose out on claiming what I regarded as legitimate business travel!

Sense however prevailed when I spoke to another official, who was a lot more understanding considering that their role as a SARS VAT auditor often put them in a similar situation to that which I found myself in.

His approach was as follows: When working in the office, the trip between home and work was logged as private.  However, when he went directly to a client, he logged the trip as business, but subtracted the distance that he would have travelled to his normal place of work.  If the trip to the client was less than his normal distance to the office, it would therefore be logged as private.

In his experience SARS had never raised any queries regarding this approach—but then they wouldn’t audit one of their own, would they?

I think that the latter approach is a more pragmatic, and inherently fair one.  However, with logbooks being compulsory, SARS is likely to subject travel claims to closer scrutiny—using tools such as Google Maps to verify distances—and it will be interesting to see if a firm ruling will emerge concerning this issue.

 

Steven Jones is a registered SARS tax practitioner, a practicing member of the South African Institute of Professional Accountants, and the editor of Personal Finance and Tax Breaks.