Learnership allowance

2008-03-19 00:00

Since the inception of the learnership allowance, it appears that employers have reaped the benefits of claiming an additional tax deduction against their taxable income. The learners have also been exposed to the necessary practical experience, which encompasses a great deal of supervision and "hands on" training. A formal written agreement must exist between the employer and the learner and the relevant terms and conditions of employment must be stated concisely.

In a guide, issued on March 17, 2008, the South African Revenue Service (SARS) indicated that the purpose of the tax incentive is to encourage job creation by reducing the cost of hiring and training employees through learnerships and to encourage human capacity development. Furthermore, in the 2008 Budget Speech, the Finance minister announced that the incentive will also apply to longer learnerships. The current learnership allowance was due to expire in October 2006, but has been subsequently extended to October 1, 2011. The Minister also announced that there would be favourable tax incentives in respect of registered learnership agreements entered into with disabled persons on or after July 1, 2006.

The guide states that there are seven requirements that must be met before the employer will be eligible for the allowance:

o A learnership agreement must have been entered into or completed during the year of assessment;

o The learnership agreement must be a registered learnership agreement;

o The learnership agreement must have been entered into between October 1, 2001, and September 30, 2011;

o The employer must be the original employer in terms of the learnership agreement;

o One learnership agreement may not be replaced by another agreement;

o The learnership agreement must have been entered into during the course of trade;

o The relevant documentation must be completed and retained by the employer.

There are different allowances that may apply and each case needs to be determined on its own merit. The current legislation will be amended soon to take into account the long-term learnerships as well as agreements with disabled persons.

It is important to note that an allowance may be claimed at the commencement as well as the completion of the learnership. There is confusion as to whether an employer is entitled to claim the learnership allowance if he is exempt from the skills development levy. In certain instances, employers will not be permitted to claim the allowance. There are situations when the allowance will be recouped particularly upon early termination of the agreement.

With the move to e-filing, the retention of records becomes increasingly important. SARS have indicated that the current retention period will also apply in the case of learnership agreements. It is in the best interest of the taxpayer to check the amount allowed by SARS with respect to the learnership allowance and to lodge objections in the prescribed form, if she/he has not claimed the appropriate deduction.

Nolan Daniels

Tax Compliance Manager

083 776 2271

nolan.daniels@kpmg.co.za

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