Right of use of motor vehicle - fringe benefit to member of CC

[Linka]

Hi there

I have a question regarding motor vehicle fringe benefit where a member of a CC uses the vehicle registered in CC's name.

The member works from home (so there isn't any private usage for travel from office to work) and he travels extensively for business purposes. The vehicle is mostly used for business purposes (90%) of the time. At most there is one or two times a year that the vehicle is used for private travel.

Should the member still be taxed on a motor vehicle fringe benefit each month. It seems unfair as the vehicle is used solely for business trips.
Would it be possible to tax him only those months were private travel incurred?

Thank you!

[Jddt]

Hi There

That is correct. Could I perhaps advise the following:

1) Consider the structuring of this arrangement.

I would advise that the ownership of the motor vehicle be trf into the personal name of the member and a decent travel allowance allocated to him each month.

A log book is kept and business recorded - A TIP Here - Allocate all travel as business here then.

The fuel and maintenance elements can be reimbursed and thus no tax consequences, a monthly vehicle return can be filled in for this.

This would be a away around your current situation, obviously we would have to look at figures then I could structure it for you if need be?

Hope this helps you more.

[Wildsniper911]

Hi
You can still get a deduction for the right of use of a motor vehicle. Let say you calculate the taxable benefit to be R168000. The Member kept a logbook and he traveled a total of 21000km for the year and 18000km was for business. Then the calculation would be 168000 * 18000/21000 = 144000. You can deduct the R144 000 from the R168000.

The member can also deduct Petrol costs, Repairs and maintenace and licence costs if he paid it for himself. But you will use teh private kilometers this time. Same scenario as above. Lets say repairs on vehicle was R3000 and licence R600 and member paid for the fuel. For the licence and repairs, you will then take the private kilometers/total kilometers * cost, for the Fuel you'll use the tariff for fuel that is determined by SARS and multiply it with the private kilometers. These can also be deducted from the taxable benefit.

[miriam790]

I also please need to know. One of my client has a CC (he is the Director) and the company is paying a monthly installment for his car. The car is not used for the business and he is working from home, no logbook. I am not sure what would be correct because he is the owner of the company. Is the company actually allowed to show the car in the books if the car is not used for the business at all?

[Beancounter]

I also please need to know. One of my client has a CC (he is the Director) and the company is paying a monthly installment for his car. The car is not used for the business and he is working from home, no logbook. I am not sure what would be correct because he is the owner of the company. Is the company actually allowed to show the car in the books if the car is not used for the business at all?

If the car is registered to the company, it has to be reflected as an asset in the company's balance sheet and the instalment sale as a liability in the balance sheet. The shareholder / director receives a company car benefit and must get the benefit at 3.5% per month (3.25% if the car is subject to a maintenance plan of 3 years or 60k km's) of the car's cost price (including VAT) on his IRP5 against income code 3802. He can claim business travel on his ITR12 submission if he submits a log book of business travel. Remember to keep VAT on the fringe benefit in mind if the company is registered for VAT.

On a car valued at R300k bought over 5 years at 9.5% interest p.a. I've calculated that the tax consequence is that it is better to have the car registered to the person's name rather than to the company's name. If the car is registered to the company, the person pays tax of R252k if taxed at 40% on the company car benefit over 5 years (excluding primary rebates etc.). The company benefits only R105k in tax at 28% on the annual depreciation and interest.

[dellatjie]

@Beancounter - I would have done the same as you - I would also list the car against assets, but what I am curious about is the following:

An asset's definition is (IFRS for SME's):

"An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity."

What would the future economic benefits be in this case?

[Beancounter]

@Beancounter - I would have done the same as you - I would also list the car against assets, but what I am curious about is the following:

An asset's definition is (IFRS for SME's):

"An asset is a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity."

What would the future economic benefits be in this case?

The future benefit is business generated from the owner of the business using the vehicle to travel to see clients and suppliers. The same as a piece of machinery used in the production of goods sold.

[dellatjie]

Oh sorry, I misread the facts, I thought he uses the vehicle for personal purposes. Thank you Beancounter!

[Tato]

I am getting confused by all these "fringe benefits". Please help:
Our VAT registered (farm) CC owns two (single cab) bakkies, two tractors/diggers, one SUV to tow heavy trailers long distance (150km) between two company farms, and various petrol driven farm machinery.
All of them are used "exclusively" for business purposes (min. 95%).
For which of the above do I have to keep a log book?
Do I need to register every "trip", even when not leaving the farm?
Or is it possible to just register the rare private trip/use (e.g. by a member of the CC)?
When I buy petrol (filling jerry cans) to be used for farm machinery, can I just use the slip to book as expenses? I mean, in theory I could have filled my private car with it.
Till now, we have never tried to recover the diesel tax. Where can I find a simple manual to do it?
Oh, man, so many questions ...
Should I start a new thread?

[Andromeda]

An individual taxpayer who wants to claim against a travel allowance he has received, or against use of a company owned vehicle, would need to keep a logbook to prove his claim of business use. You are referring to company vehicles used on company business; no logbook is required.

If you want to claim the diesel rebate then you need to first register at SARS. This page will help

[dellatjie]

@Tato,

I think you should rather start a new thread, as you are referring to diesel rebates and claiming thereon, and this thread relates to fringe benefits - benefits which a person receive due to the fact that they are employed by a company.

[Tato]

An individual taxpayer who wants to claim against a travel allowance he has received, or against use of a company owned vehicle, would need to keep a logbook to prove his claim of business use. You are referring to company vehicles used on company business; no logbook is required.

Thank you, this answers my questions.
But why would an individual taxpayer claim against the use of a company owned vehicle? He/she would do that only, if he/she has to use own money to fill up the tank, for business travel. Am I right?
So if the company pays for petrol etc., then the individual would have no reason for a claim!? On the contrary, he/she might have to (theoretically) declare "fringe benefits", in case the vehicle is being used privately, too. Correct?

[Andromeda]

No Tato. A person having the use of a company vehicle pays tax on the fringe benefit that it represents. That fringe benefit value he is able to reduce by claiming the business usage (which does not represent a benefit) from the fringe benefit.