The Learnership Tax Incentive was introduced to encourage skills development and stimulate job creation, by providing an additional tax deduction for formal, SETA-registered training programmes.
Section 12H provides a deduction to an employer in addition to any other deductions allowable under the Act for any registered learnership agreement if all the requirements referred to in section 12H are met.
In some cases, more than one employer may be a party to a registered learnership agreement. In such event, only the “lead employer” identified in the learnership agreement may claim the allowances under section 12H.1
Two types of deductions are available, namely:
an annual allowance, to which the employer is entitled in any year of assessment in which a learner is a party to a registered learnership agreement [section 12H (2)]; and
a completion allowance during any year of assessment in which the learner successfully completes the learnership [section 12H (3) and (4)].
The key features of these allowances are that:
the annual allowance is subject to a pro rata reduction if the registered learnership agreement does not cover the full 12 months during any year of assessment [section 12H(2)(b)].
different rules apply in determining the completion allowance for registered learnership agreements spanning periods of less than 24 months, and those which cover a longer period [section 12H (3) and (4)]; and the quantum of these allowances is increased if the learner is a person with a disability [section 12H (5)].
The employer will qualify for the annual allowance if:
during any year of assessment, the learner is a party to a registered learnership agreement with the employer
the agreement had been entered into pursuant to a trade carried on by that employer; and
the employer has derived “income” as defined in section 1 from that trade.
The allowance only applies to a period during which a learner is a party to a registered learnership agreement with an employer.
Thus, an employer will not qualify for the annual allowance during any period in which:
a learnership agreement is not registered, subject to the deeming provision of section 12H(2)(c); or
a learner is not in employment.
The employer will qualify for the completion allowance if:
during any year of assessment, the learner is a party to a registered learnership agreement with the employer.
the agreement had been entered into pursuant to a trade carried on by the employer.
the learner successfully completes the learnership during the year of assessment; and
the employer has derived “income” as defined in section 1 from that trade.
In order to encourage employers to develop the skills of persons with a disability, the value of the deduction is increased from R50 000 to R60 000 for qualifications from NQF level 1 to NQF level 6 and remains at R50 000 for qualifications from NQF level 7 to NQF level 10.
The criteria prescribed by the Commissioner relating to disability are contained in form ITR-DD “Confirmation of Diagnosis of Disability”, which is available on the SARS website.
An employer may not claim any annual allowance or any completion allowance for a new registered learnership agreement if:
a learner, who is party to the new registered learnership agreement, has previously failed to complete any other registered learnership agreement to which the employer or an associated institution was a party; and
the other registered learnership agreement contains the same education and training component as the new registered learnership agreement.
An employer’s year of assessment ends on the last day of February.
An employee (NQF level 7 to NQF level 10), commenced employment on 3 January 2017 and signed a three-year learnership agreement on 10 January 2017.
The quantum of the completion allowance
The completion allowance is granted once-off in addition to the annual allowance and is deductible in the year of assessment in which the learner successfully completes the learnership.
SARS requires sufficient proof of the successful completion of the learnership agreement in order, to allow the completion allowance as contemplated in section 12H. Normally confirmation from the relevant SETA is deemed by SARS to be confirmation of successful completion.
Many employers, however, are having difficulty in obtaining this confirmation from the SETA in the year of assessment in which the learnership was completed.
The quantum of the completion allowance
In view of these difficulties SARS will consider alternative proof. Any objective evidence as proof of successful completion will be accepted, for example:
a statement of results issued by an accredited training provider
an evaluation report by a registered assessor on workplace experience.
A specific list of what is considered, to be objective evidence cannot be provided, however, each case will be determined on its own facts.
Besides the objective evidence of successful completion, the employer must also satisfy SARS that it did take reasonable steps to request confirmation of completion from the SETA.
Substitution of employers Under section 17(5) of the Skills Development Act an employer may be substituted with the consent of the learner and approval of the SETA that registered the learnership agreement.
As a result, when, a learner moves from Employer A to Employer B:
Employers A and B will be entitled to claim a pro rata portion of the annual allowance in the year of assessment in which the learner changes employment
Employer A will not be entitled to any further annual allowances or the completion allowance
Employer B will be entitled to future annual allowances, subject to apportionment in the year of completion if the final period consists of less than 12 full months; and
Employer B will be entitled to the completion allowance provided that the learner successfully completes the learnership while in Employer B’s employ.
Termination of the learnership agreement
In the event that a registered learnership agreement is terminated (whether by the employee resigning or by the employer terminating the learner’s employment), the employer will be able to deduct an amount equal to a pro rata portion of the annual allowance in that year.
The employer is not entitled to deduct any further annual allowance or the completion allowance since the learnership agreement is terminated and the learnership is not completed.
Reporting requirements
Under section 12H(8) an employer that becomes entitled to deduct the annual allowance or the completion allowance in any year of assessment must submit certain information relating to that learnership agreement required by the SETA with which the learnership is registered, in the form and manner and at the place and time indicated by the SETA.
The SETA is required under section 12H(7) to submit to the Minister of Finance any information relating to that learnership agreement required by the Minister in the form and manner and at the place and time that the Minister prescribes.
The above may not be construed as tax advice, kindly liaise with your tax specialist and visit SARS website for more information
www.sars.gov.za
SARS Contact Centre 0800 00 SARS (7277)
Visit your nearest SARS branch (to locate a branch visit www.sars.gov.za
Open: Monday, Tuesday, Thursday & Friday 08:00 to 16:00; Wednesday 09:00 to 16:00