Faculty of Commerce, Law and Management (ETDs)

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    The application of section 24c allowances in respect of future expenditure on contracts
    (University of the Witwatersrand, Johannesburg, 2022) Sakhela, Asanda; Koker, De
    A discrepancy may exist when a taxpayer is taxed on the income on receipt or accrual. For a taxpayer in receipt of such income with the obligation of fulfilling the attendant contractual duties, the expense is only deductible when the requirements of section 11(a) read together with section 23(g) of the Act have been met. According to the general deduction formula, the expenses can be claimed when incurred. Future expenditures to be incurred will not be deductible under the general deduction requirements, however, a relief with reference to section 24C is available by deducting the expenditure to be incurred in subsequent years in the year income is received. Over the years, taxpayers have found themselves faced with SARS reviews and/or audits on the deduction under section 24C. This has resulted in various tax court cases with the latest appealed in the Constitutional Court. As new rulings regarding section 24C application appear quite frequently this research examines various tax court cases up to volume 84 of the South African Tax Cases. The research will analyse section 24C as per the Act and explore the requirements of Interpretation Note 78 entitled ‘Allowance for future expenditure on contracts’ – 2014 (IN 78) including the challenges faced by taxpayers in the application thereof.
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    A practical approach to section 24C allowances in future expenditure on contracts
    (2021) Ngema, Ntokozo
    Section 24C of the South African Income Tax Act 58 of 1962 allows for a deduction against a taxpayer’s income, where the income was received under a contract and the taxpayer, in fulfilling that contract, would be required to finance future expenditure. The purpose of the section is to match the revenue and expenditure within a specific tax year of assessment. Revenue received in advance is taxable when it is received however if the taxpayer is required to incur expenditure against that revenue, they can make use of the provisions of section 24C and get a deduction against that revenue for the future expenditure. Recent court judgments suggest that taxpayers are incorrectly applying the provisions of section 24C. The courts have found in favour of the South African Revenue Service on at least two occasions recently. This study will look at the provisions of section 24C as well as the pitfalls that South African taxpayers ought to avoid when applying this section