Betty Bookkeeper explains why Sole Proprietors must submit logbooks to claim travel expenses – December 2016
Hi Betty 
We’ve recently had two clients (both Sole Proprietors): one for which SARS disallowed all the motor vehicle expenses (fuel, insurance, depreciation, repairs) due to the non-submission of travel logbooks, and another with a tax audit requesting travel logbooks.
Both of the clients did not have travel allowance or the use of company vehicles on their personal income.
Is it compulsory that a Sole Proprietor should submit a logbook in order to claim business motor vehicle expenses? If yes, in which section in the Tax Act will I find this?
Regards,
Riette
Hi Riette
Yes, a Sole Proprietor must submit a logbook to claim travel expenses. Many times sole traders use their own vehicles for business travel purposes for which they will seek a deduction in terms of section 11(a) of the Income Tax Act (“ITA”).
They will be able to obtain the deduction to the extent that the expenses are actually incurred in the production of income.
Section 11 deductions must be read together with section 23 of the ITA, which prohibits deductions in certain circumstances.
Section 23(g) specifically disallows deductions “in respect of… any moneys, claimed as a deduction from income derived from trade, to the extent to which such moneys were not laid out or expended for the purposes of trade.”
A sole trader’s motor vehicle is usually used for both private and business purposes. All the expenses incurred in respect of that vehicle will not expended for the purposes of trade and to such extent, will not be deductible in terms of section 11(a).
The sole trader must therefore apportion his motor vehicle expenses (which he actually incurred) between whatever relates to business use and private use. It is only the portion of total motor vehicle expenses relating to business use that will be deductible [assuming all other section 11(a) requirements are met]. This is why business kilometers traveled during the tax year, and by extension a logbook to prove such, is important. It allows the sole trader to verify (to SARS) the apportionment of the vehicle expenses for business use.
Section 102(1)(b) of the Tax Administration Act (TAA) states that the taxpayer bears the burden of proving that an amount is deductible. The logbook can assist the taxpayer in discharging this burden of proof. Furthermore, section 23 of the TAA also requires that a person who has submitted a return keep records that enable SARS to be satisfied that a person has observed the requirements of a tax Act.
SARS can request a logbook for the purpose of verifying the motor vehicle (business) expenses of a sole trader.
The following is an excerpt from the SARS 2014 Comprehensive Guide to the ITR12 return for individuals:
8.5.5 TRAVEL EXPENSES (NO ALLOWANCE E.G. COMMISSION INCOME)
If you did not receive a travel allowance but incurred travel expenses in the production of your income, you may claim a deduction based on a logbook that must be retained for a period of 5 years after the date of submission of the return and must be available on request from SARS. The amount of your claim must be filled in next to code 4015.
Hope that helps!
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