HOME OFFICE EXPENSES

6 Questions to determine if you are eligible to claim Home Office Expenses.

SARS’ “Home Offices Expenses Questionnaire” here says that answering ‘Yes’ to all 6 questions below confirms eligibility to claim home office expenses.

1. Did you receive remuneration for duties performed mainly (more than 50%) in part of your private premises occupied for purposes of that remuneration ?
2. Do you have a dedicated room in your premises ?
3. Is this room specifically equipped for the purpose of that remuneration ?
4. Is this room regularly used for purposes of performing the duties in relation to that remuneration ?
5. Is this room exclusively used for purposes of performing the duties in relation to that remuneration ?
6. Did you incur home office expenditure relating to your domestic premises ?

Beware of the Pitfalls

1. The specific wording, narrow interpretations and possible changes to home office expenses could place taxpayers at risk. For example, to claim home office expenses, the home office must be a room “dedicated” to work where duties are performed “mainly’ or “more than 50% of the time”, and it must also be “specifically equipped” and “regularly” and “exclusively” used for work. Wording such as this, along with possible changes and the narrow interpretations suggested in the most recent draft Interpretation Note (IN28) should prompt employers and employees to take professional advice before deciding to claim a tax deduction in respect of home office expenses.
2. The burden of proof lies with you as taxpayer. Employees should be provided with written confirmation regarding the specific timeframe they are required to work from home. In addition, employees should keep a running spreadsheet of hours and days worked at home covering the entire tax year, or consider other solutions such as keyboard tracking software, stealth monitoring or mobile time clocking solutions.
3. Home office expenses must be linked to employment use and must be verifiable. Be sure to retain invoices and statements of all home office expenses. Where expenses are not specified as deductible in the Income Tax Act, opting for reimbursement by your employer may be a more efficient solution.
4. The possible impact on capital gains tax. SARS warns that where the home office is on taxpayer-owned property, formally defining part of a primary residence as a home office will ‘most likely have an adverse impact on a future capital gains determination’. This is because the home office area will, on a pro-rated basis, be excluded from the primary residence exclusion of R2 million on disposal of the residence. Careful consideration should therefore be given before a claim for home office expenses is made and it is essential to get professional advice on this aspect.
5. Increased risk of being audited. SARS warns that while all claims for home office expenses may be subject to further verification or audit, there is a high likelihood that a taxpayer who claims home office expenses for the first time will be selected for verification or audit.

Bernard Schoeman, adapted.

• Thirusha Govender

6 September 2021