IN 58: Principles enunciated by the Brummeria case

Background:

At the outset, it should be noted that the principles dealt with in this BGR remain unchanged. SARS has published Issue 3 of Binding General Ruling (“BGR”) 8 to update the dates and weighted average prime overdraft rates for banks relating to the relevant year of assessment in the examples.

As a refresher, the Brummeria case established that the right to use loan capital interest free has an ascertainable money value that should be included in the gross income of taxpayers.

Note that BGRs are binding upon the Commissioner and both SARS and taxpayers would be entitled to cite them as precedent in proceedings before the Commissioner or the courts. BGR 8 specifically is binding as of 31 December 2008 and will remain binding for an indefinite period

Interpretation Note (“IN”) 58 (Issue 3), which also deals with the Brummeria case and the right to use loan capital interest free, has similarly been updated.

IN 58 outlines the treatment of receipts or accruals in a form other than money for purposes of the definition of “gross income” in section 1(1) as a result of the SCA judgment in the Brummeria case. 

It further reproduces paragraph 3 of BGR 8 (issue 3) “Application of the principles enunciated by the Brummeria case”, which prescribes in which year of assessment the right to use an interest-free loan should be included in the taxpayer’s gross income as well as the method to calculate the value of such right.

Find a copy of BGR 8 here.

Find a copy of IN 58 here.

20/05/2022