GDF: Actually incurred in the YOA

Question 1

What does actually incurred mean?

Answer 1

It means the tax payer has an unconditional legal liability to pay

Question 2

What does “actually incurred” NOT mean?

Answer 2

1. That the expenditure must have been actually paid
2. Due and payable
3. Necessarily incurred
4. Uncertain future expenditure
5. Provisions

Question 3

“During the YOA”
Concentra Ltd v CIR

Answer 3

TP agreed to reimburse travel costs of its directors

Directors claimed reimbursements for year 1 and 2 in year 3

LQ: can you deter expenditure?

Court: No. you have to claim a deduction for expenditure in the year in which liability arose

Question 4

Nasionale Pers BPK v KBI

Answer 4

The bonuses case.

Condition: still had to be employee by 31 October

Court: Condition and Uncertain future event

Condition = no expenditure and not actually incurred - no unconditional legal liability to pay

Question 5

Golden Dumps (Prescribed)

Answer 5

Mining company who appointed new director and promised director shares as part of appointment.

LQ: when was the expenditure actually incurred 1981 or 1985?

Court: Expenditure in contingent if there is an uncertain event that must occur
Until a court or arbitrator makes a ruiling or until one of the parties admits the claim - expenditure is contingent thus cannot “actually” incur for the purpose of receiving deductions

Outcome:
Court held expenditure incurred in 1985 therefore TP didn’t defer expenditure = deduction allowed

Question 6

Telkom Ltd v C:SARS

Answer 6

application of section 23H
benefit that telkom got was the subscription fees that will be paid well over 1 year

Therefore telkom i.t.o 23H has to spread out the expenditure (can only deduct a portion of the bonuses they paid out)