CARMEL RICKARD: Taxpayer vs Sars
A recent ruling by the tax court has interesting implications in terms of contracts between franchisers and franchisees
Interested in the franchise sector? Then you should study the tax court’s newest decision that illustrates how the revenue-collecting authorities are thinking about franchise contracts that include an obligation to make regular upgrades of business premises. "B", an unnamed taxpayer operating a chain of franchise eateries, appealed against Sars’s additional assessments for 2011 to 2014. B claimed certain allowances for future expenditure on refurbishing and upgrading the restaurants under section 24C of the Income Tax Act, but Sars refused the claims, disputing B’s interpretation of the section and whether it even applied. This section allows a taxpayer who receives funds in a particular year as part of a contract to have some of these funds ring-fenced or deducted by Sars "by way of a reserve" to finance future expenditure.
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