Section 12H of the Income Tax Act 58 of 1962 grants an allowance to employers in respect of ‘registered learnership agreements’. A registered learnership agreement is defined as one which is registered in accordance with the Skills Development Act 1998 and is entered into between a learner and an employer before a date specified in the Act.
From a tax policy, this allowance is granted to employers to encourage skills development for employees.
Section 12H contained a sunset clause of 1 October 2016. Registered learnership agreements entered into before 1 October 2016 fall under the old section 12H, which targets all skills levels equally.
Learnership agreements entered into on or after 1 October 2016 fall into the new section 12H, targeting employees most vulnerable to unemployment due to a lack of relevant qualifications. The sunset clause has been extended to 31 March 2022.
The allowances available under the new section 12H are summarised as follows:
Reference to the Income Tax Act, Section 12H(2)(a): Scenario: The employer being a party to a registered learnership agreement for the full year of assessment. Allowance: NQF (1–6) R40 000; NQF (7–9) R20 000.
Reference to the Income Tax Act, Section 12H(2)(b): Scenario: The employer being a party to a registered learnership agreement for only a part of the year of assessment. Allowance: NQF (1-6) R40 000; NQF (7-9) R20 000 in the same ratio as the number of full months bears to 12.
Reference to the Income Tax Act, Section 12H(3): Scenario: The learnership agreement of less than 24 full months was completed by the learner. Allowance: NQF (1–6) R40 000; NQF (7–9) R20 000.
Reference to the Income Tax Act, Section 12H(4): Scenario: The learnership agreement that equals or exceeds 24 full months was completed by the learner. Allowance: NQF (1–6) R40 000; NQF (7–9) R20 000 multiplied by the number of consecutive 12-month periods within the duration of that agreement.
Note that where a learner is a person with a disability (as defined in section 6B(1) of the Act), the amount of R40 000 / R20 000 is increased by an amount of R20 000 / R30 000 respectively. In order to claim the additional allowance for disabled learners, the employee must be disabled on the date that the learnership agreement is entered into with the employer.
Section 23B prohibits a deduction or an allowance under more than one provision of the Act. Section 23B is not applicable where a section expressly permits a double deduction. Section 12H is an example of an allowance section which expressly permits the allowance under section 12H in addition to the salary costs claimed as a deduction in terms of section 11(a) of the Act.
If the agreement is registered in accordance with the Skills Development Act within 12 months of the company’s year-end, the agreement is deemed to have been registered on the date of signature of the learnership agreement.
Muneer Hassan CA(SA) is a Tax Consultant, Senior Lecturer in Taxation at UJ and Lecturer on the Gauteng Board Course