12H Learnership Allowance Tax Incentive

Purpose of the Tax Incentive

The “Section 12H” learnership allowance is intended to be an incentive for employers to encourage skills development within their workforce, with the hope to create jobs and economic growth.

It’s effectively a tax deduction, which an Employer may claim - if it’s paying for training or an apprenticeship - for any of its employees in terms of a registered learnership agreement.

The incentive is currently available to all registered learnership agreements that were entered into on or after 1 October 2016, but before 1 April 2024, as the section 12H allowance has a sunset clause (end date) of 1 April 2024.

What is a Learnership Agreement?

In order to understand the concept “learnership agreement”, it is important to understand what a “learnership” is.

A learnership is a work-based approach to learning and gaining qualifications. The Skills Development Act, 1998 sets out the criteria of a learnership, namely, it must –

• consist of a structured learning component;
• include a structured work experience component;
• lead to a qualification registered by the South African Qualifications Authority associated with a trade, occupation or profession; and
• be registered with the Director-General of the Department of Labour in the prescribed manner.

Learnerships include traditional apprenticeships registered with the Department of Labour in terms of the Manpower Training Act, No. 56 of 1981.

A learnership agreement is an agreement entered into for a specified period between –

• a learner (i.e. Candidate Property Practitioner);
• an employer or a group of employers (i.e. the estate agency); and
• a skills development provider accredited by the Quality Council for Trades and Occupations (i.e. Services SETA).

The agreement must be in the prescribed form and registered with a SETA in the prescribed manner, with terms outlining the following:

Role of the Employer

• employ the learner for the period specified in the agreement (where the learner was unemployed when entering into the learnership agreement, the employer must enter into a contract of employment with the learner);
• provide the learner with the specified practical work experience; and
• release the learner to attend the education and training specified in the agreement;

Role of the Learner

• must work for the employer (under an employment contract); and
• must attend the specified education and training and submit all documents required to complete the training;

Role of the Skills Development Provider

• carry out the education and training as specified in the agreement; and
• provide the learner with support as specified in the agreement.

Qualifying Criteria

Employers will qualify for the annual allowance only if:

• During any year of assessment, the learner is part of a SETA-registered learnership agreement with the employer;
• The learner completes an NQF-level qualification from 1 to 10;
• The agreement is entered into with reference to a trade carried on by that employer;
• The employer derives ‘income’ from that trade; and
• The employer must complete a declaration (IT80) for the purpose of claiming a deduction for an allowance.

In the case where more than one employer is a party to a registered learnership agreement, it is only the employer identified in that agreement as the lead employer who may claim the section 12H tax allowance. If a learner works for two companies during the time of their learnership, it may be possible for each company to claim a portion of their allowance, as described in the following section.

What is the value of the tax incentive?

The allowance is made up of two parts:

1. An annual allowance – this is available for each year of assessment in respect of which the learner partakes in the learnership. It is assigned “pro-rata” if the agreement was not in effect for the full year.
2. A completion allowance – a once off allowance available in the year of assessment in which the learner successfully completes the registered learnership agreement. It’s claimed in full regardless of which month, in the year, the learnership was completed. It’s claimed in addition to the annual allowance, meaning that in the year of completion, the employer can claim both the annual allowance and the completion allowance.

The following annual and completion allowances apply to learnerships entered into after 1 October 2016:

Proof of completion

For employers to claim the section 12H completion allowance, SARS requires proof of the successful completion of the relevant learnership agreement. Confirmation from the relevant SETA, in the form of completion certificates, is normally accepted by SARS as sufficient proof of completion. However, many employers have, in the last few years, experienced significant delays and difficulty in obtaining such confirmations from the SETA in the year of assessment during which the learnership was completed.

SARS has communicated that, considering these challenges, they will accept any alternative objective evidence as proof of successful completion.

This includes a statement of results issued by an accredited training provider or an evaluation report by a registered assessor on workplace experience, provided that the employer also provides evidence to SARS that reasonable steps were taken to request confirmation of completion from the SETA.

Why use Phoenix Group to assist?

During the last 12 months we have assisted over 350 Property Practitioners in obtaining their FETC NQF4: Real Estate qualification - successfully completing the course and receiving their Services SETA LA Number to allow them to write the PDE4 Exam.

Allow us to support your agency further by assisting you to claim your S12H tax allowance incentive. The additional services we can provide include:

• Documentation to prove the learner’s successful attendance and completion of the education and training;
• Completion of Learnership Agreements between the agency and the learner;
• Registration of the Learnership Agreements with the Department of Labour and Services SETA (which is mandatory);
• Completion of the IT180 per learner and subsequent submission to SARS on your behalf; and
• Streamlining of the process and handling all stakeholder queries - which frees up your time to manage your business.

Contact us now to get this process started. We can assist whether your learners are registered with us, or another training service provider.