On the 6th of August 2013 SARS released an interpretation note which seeks to shed some light on the interpretation of section 11(d) of the Income Tax Act (Act 58 of 1962) which allows a deduction for expenditure incurred on repairs for the purposes of trade1.

Expenditure on repairs to a capital asset that cannot be said to amount to trading stock is likely to be deemed to be expenditure of a capital nature and therefore not deductible for the purposes of the general deduction formula. In general terms, the general deduction formula only allows for deductions to be made when these deductions cannot be said to relate to expenditure of a capital nature. Section 11(d) of the Act provides that expenditure incurred on repairs for the purposes of trade are deductible but only provided that the requirements of the section are met.

Section 11(d)

Section 11(d) provides as follows:

11. "General deductions allowed in determination of taxable income

For the purpose of determining the taxable income derived by any person from carrying on any trade, there shall be allowed as deductions from the income of such person so derived—

(d) expenditure actually incurred during the year of assessment on repairs of property occupied for the purpose of trade or in respect of which income is receivable, including any expenditure so incurred on the treatment against attack by beetles of any timber forming part of such property and sums expended for the repair of machinery, implements, utensils and other articles employed by the taxpayer for the purposes of his trade."

The word that often causes confusion in this context is "repairs". According to SARS, this word must be given its ordinary grammatical meaning because the Act does not provide a definition for it. SARS give the definition as being: "to restore (a structure, machine, etc.) to unimpaired condition by replacing or fixing worn or damaged parts; mend" or "[t]o restore (something damaged or broken) to good condition or working order".

According to SARS, it is immaterial whether repairs are necessary because damage has been caused by a fortuitous act such as a fire or whether they are necessary because of normal wear and tear resulting in the need for renewal or restoration. What is important though, is that where the asset is entirely reconstructed then the expenditure will be capital in nature and not deductible. In the case of ITC 617112 the court laid down certain guidelines which may be used to establish whether "repairs" for the purposes of section 11(d) have in fact been effected. These guidelines are as follows:

  • A repair is restoration by renewal or replacement of subsidiary parts of the whole. Renewal, as distinguished from repair, is reconstruction of the entirety, meaning by the entirety not necessarily the whole but substantially the whole subject matter under discussion.
  • In the case of repairs effected by renewal it is not necessary that the materials used should be identical with the materials replaced.
  • Repairs are to be distinguished from improvements.

A further point of contention in the past has surrounded the question of whether "repairs" in the context of section 11(d) includes maintenance. According to SARS, expenditure incurred on maintenance will be deductible under section 11(d) if the maintenance complies with the essential elements of a repair as outlined above by the guidelines provided by the courts.

Repairs and improvements distinguished

SARS have summarised some guidelines, gleaned from case law that can be used when distinguishing between repairs and improvements – often not an easy distinction to make. They are as follows:

  • Has a new asset been created resulting in an increase in the income-earning capacity or does the work undertaken merely represent the cost of restoring the asset to a state in which it will continue to earn income as before?
  • Unless the structure or article on which repairs are deemed to have been done was damaged or had deteriorated and replacement was required, no repair for the purposes of section 11(d) has taken place and no further inquiry need be made.
  • Materials used for the repair need not be identical to the original materials that are being replaced. As long as the purpose of the work is to restore the asset to its original condition, as distinct from creating an improvement, the work constitutes a repair. The fact that new materials are substituted for the old at a greater cost than would have been incurred had the same materials been used is not relevant. Each situation must be decided on its own merits in order to determine whether the use of new materials is for the purpose of improvement or merely for the purpose of restoring the asset to its original condition.
  • Repairs undertaken at the same time as improvements may qualify for deduction under section 11(d) if they can be clearly and separately identified from the improvements. Much will depend on the facts of the specific case and the taxpayer will bear the onus of showing that what was undertaken was a repair.
  • The addition of something to an asset that was not previously there will usually be considered to be an improvement rather than a repair. The underpinning of foundations to remedy cracks in a building, the strengthening of retainer walls by the construction of new beams and the replacement of an existing solar heater with a better one would all be deemed to be improvements because something was added that was not there before.


Before effecting repairs to any trade assets, whether moveable or immoveable, the taxpayer should ensure that the expenditure so incurred will not be disallowed by SARS because it does not fit within the necessary guidelines set out above. Where a taxpayer is unsure it is worth discussing the nature of the repairs that the taxpayer plans to undertake with a tax attorney or practitioner.


1 Interpretation Note 74

2 (1946) 14 SATC 474 (U)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.