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Deductible company expenses

Posted 16 July 2015 under Tax Questions



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MCCJ7 says:
13 July 2015 at 13:32

For many years I operated as a sole Proprietor. Early 2014 I registered a PTY Ltd and duly traded as the PTY LTD. As executive director, by choice I did not draw any salary, the idea being that this would help the company cashflow by saving more working capital. I paid for all vehicle expenses ie fuel, maintenance, privately out of my savings, but approximately 90% of the vehicle use and expenses are attributable to the PTY LTD business. Is there any way that these expenses can be recovered from the PTY, or in other words, can these expenses form a part of taxable deductions to the PTY, or is it all a huge overtaxed loss in my personal account??

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TaxTimTaxTim says:
15 July 2015 at 15:04

There are several ways, but if there is cash in the company then it can pay you back for these expenses and then deduct the amounts as part of the expenses incurred by the business. Effectively you are just loaning the business money. Do you have records of these expenses?


MCCJ7 says:
15 July 2015 at 16:21

Thank you. I am not particularly bothered with getting the monies back just yet, more-so making sure the "value" thereof is seen as a company expense and therefore has the tax deduction benefits. The refund can either be made by virtue of a physical transfer if and when needed, or just increase the directors loan account owed by the PTY, by the said value.

Where I am battling with this, forgive me I am not an accountant, is how do I physically bill the PTY, and in turn how does the PTY load the expenses, i.e. Do I simply hand over all of the invoices to the PTY for 100% of the cost, and the PTY then loads on 90% of their value into their expenses (assuming the business value was 90%)

Or do I in my personal capacity invoice the PTY for the expenses, somehow that does not seem right.

Many thanks indeed for your help!


TaxTimTaxTim says:
16 July 2015 at 11:50

You personally would have to invoice the business for the costs involved and then use the receipts etc as supporting documents. The business would then "pay" you and raise an expense on its books. It would be best to itemize the types of expenses on that invoice so the business knows where to record them.

Essentially the business borrowed the money from you for expenses which really did belong to them.


MCCJ7 says:
16 July 2015 at 17:15

Perfect, makes absolute sense, I am going to use the same principle when it comes to expenses such as rates, electricity etc etc.

I own the property my PTY works from. It is not a home office scenario, it is a separate property owned wholly by myself.

I am billed rates / taxes & pay for electricity in my own personal capacity however the use thereof is by the PTY.

As the property is being used solely for the purpose of conducting the PTY business, by rights so should the associated expenses of "owning" that property be fed back as PTY operating expenses, could even call it rent I guess..

Many thanks indeed!!


TaxTimTaxTim says:
16 July 2015 at 20:13

The only issue there is that you should be charging the PTY rent as it is making use of your building which means you should invoice the company for rent and you personally will be allowed to deduct the expenses you pay from that rent. Not the company.


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