ARTICLE · 21 OCTOBER 2021

SCA Decision In CSARS v Spur Group (Pty) Ltd

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Taxpayers who have made contributions to, in particular, share incentive trusts and claimed a deduction under section 11(a) of the Income Tax Act, 1962 ("the Act") on the basis that such payment was, inter alia, aimed at creating a "happy and contented" workforce.

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Taxpayers who have made contributions to, in particular, share incentive trusts and claimed a deduction under section 11(a) of the Income Tax Act, 1962 ("the Act") on the basis that such payment was, inter alia, aimed at creating a "happy and contented" workforce through the incentivisation of its employees, should take note of the SCA decision released on 15 October 2021 in CSARS v Spur Group (Pty) Ltd.

In the Spur judgement, Spur's operating company ("Opco") had made a contribution to a share incentive trust. Spur's holding company ("S HoldCo") was appointed as the capital and income beneficiary of the trust for the relevant periods. The share incentive trust used the funds advanced by Opco to acquire preference shares ("Prefs") in a newly incorporated company ("Newco"), the ordinary shares of which had been acquired by key Opco employees for a nominal value. Newco used the subscription proceeds in respect of the Prefs to acquire shares in S HoldCo. The Prefs

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