THOUGHT OF THE WEEK WHICH LEGAL EXPENSES ARE TAX DEDUCTIBLE?
Our Income Tax Act allows a taxpayer to deduct certain legal expenses incurred in the carrying on of a trade. A salaried employee acting in the course of his employment is "carrying on a trade" and he may, in certain circumstances, deduct legal expenses in defending a claim.
For example (and along the lines of a matter that appeared before the tax court in 2011), if you are a salaried employee and you are sued for defamatory remarks you made in a public speech, it is likely that you will incur substantial legal costs in defending the ensuing claim by the defamed person. These costs are tax deductible as the expenses were incurred in "ordinary operations undertaken in the carrying on of your trade?.
There are certain exceptions and other complex issues that are involved - so obtain specialist advice based on the peculiar facts of your own case.
Contact our tax experts at info@stbb.co.za.