The application of section 24c allowances in respect of future expenditure on contracts

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University of the Witwatersrand, Johannesburg
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.
A research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in fulfilment of the requirements for the degree of Master of Commerce (Specialising in Taxation) Johannesburg, 2022
Income received in advance, Future expenditure, Contract, Actually incurred, Inextricably linked, UCTD
Sakhela, Asanda. (2022). The application of section 24c allowances in respect of future expenditure on contracts [Master’s dissertation, University of the Witwatersrand, Johannesburg]. WireDSpace.