SARS recently published Draft Interpretation Note on in which it seeks to provide guidance on the interpretation and application of section 11(d) which allows a deduction for expenditure incurred on repairs for the purposes of trade.
Expenditure on repairs to an asset not comprising trading stock is likely to be of a capital nature, particularly when it is not incurred at regular intervals. This is because the expenditure relates to the protection of a capital asset. Expenditure of a capital nature does not qualify as a general deduction under section 11(a). Nevertheless, section 11(d) makes provision for the deduction of expenditure incurred on repairs for the purposes of trade provided the requirements are met.
For purposes of section 11(d) it is important to distinguish between a “repair” and an “improvement” since only expenditure incurred on repairs is deductible under section 11(d). No hard and fast rules can be provided for this distinction. Each case must be decided on its own facts.
NB: Readers should take note that the Draft Interpretation Notes documents are not final and therefore do not present the official view or policy of SARS until they are published as Interpretation Notes. These draft documents are made available to the public in order to invite comments by all interested parties (internal and external stakeholders) on aspects such as the correctness of the law, clarity on the specific area of legislation explained in the draft note and areas on which further clarity is required.
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