S24C

Question 1

Facts:
For the 2009 financial year, Clicks sought to claim an allowance in terms of S24C. S24C allowance relates to future expenditure on contracts that will be incurred after year end. Clicks based its claim to an allowance on the operation of its loyalty program, the ClubCard program. In terms of the loyalty program a Clicks customer concludes a contract with Clicks (ClubCard contract) that renders the customer eligible to earn cash back vouchers in proportion to the value of purchases made at Clicks’ stored and their close partners. Clicks argued that it uses income it earns from individual contracts of sale concluded with loyalty program members to finance its future obligation to incur future expenditure arose from the same contract and therefore it was eligible to claim a S24C allowance in respect of income it used to finance this expenditure.

Answer 1

Clicks

Issue: Is S24C allowance for future expenditure available on loyalty programs that will be cash redeemed in future?

Principle:
The sales contract, which gives rise to potential future expenditure , is not the same contract as the loyalty programme contract which establishes and governs the loyalty obligation.
Thus, no S24C allowance can be claimed on loyalty program contracts.