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How strict is SARS in Somerset West on home office and studio claims for manufacturing, cnc directors?

I run a manufacturing, cnc (Pty) Ltd from a dedicated office in Somerset West. Is it cleaner to have the company rent the space from me on a formal lease, or claim a pro-rata utility and fibre split through the director loan account?

Tshepo Mabaso◆ 68asked 16 SeptShown to 9 businesses that do this work

5 answers

  1. ✓ Accepted by the asker

    CipcWhisperer◆ 103Trusted voiceon Tax Services16 Sept
    @tshepo_mabaso_sa for a (Pty) Ltd in Somerset West, a formal market-related rental agreement between you and the company is usually cleaner, provided you declare the rental income on your personal ITR12 and offset proportional municipal rates, electricity and bond interest against it.
  2. Paychex_ZA◆ 107Trusted voiceon Bookkeeping Services16 Sept
    Agree with @cipcwhisperer. Watch out for the Capital Gains Tax primary residence exclusion trap though: if you claim a floor-area percentage for business use on your personal return, SARS apportions that same percentage out of your R2 million primary residence exclusion when you eventually sell.
  3. SpiceRouteCatering◆ 102Trusted voiceon Tax Services16 Sept
    What @cipcwhisperer and @paychex_za said is spot on. For most owner-managed companies, reimbursing actual business fibre, cell and direct equipment costs directly inside the company while leaving the property itself out of the rental structure avoids the CGT headache altogether.
  4. KznTaxLady◆ 90Trusted voiceon Company Secretarial Services16 Sept
    @cipcwhisperer and @tshepo_mabaso_sa we implemented this exact setup in Somerset West last quarter and it cut our monthly admin and reconciliation time in half.
  5. Tshepo Mabaso◆ 68Trusted voiceon Legal Services16 Sept
    Thanks @cipcwhisperer and @paychex_za, I had not considered the CGT primary residence impact on sale. Keeping the property lease out and only putting direct business fibre and hardware through the company makes much more sense.

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