Three Rulings, Three Different Lessons: Inside September's Biggest SARS Court Decisions

C:SARS v Cornucopia Trust is the most consequential of the three decisions for ordinary commercial taxpayers, and it resolves a genuinely unsettled question that has troubled practitioners since a 2016 legislative amendment.

The background matters here. Section 24J of the Income Tax Act allows interest, and certain other finance-related charges, to be deducted even where the underlying expense would otherwise be capital in nature — a significant exception to the general rule that capital expenditure isn't deductible. For years, the section covered "interest or related finance charges," a formulation broad enough that most costs connected to a financing transaction could plausibly qualify. In 2016, Parliament amended the wording to "interest or similar finance charges" — a deliberate narrowing, intended to stop taxpayers from claiming deductions for costs only loosely connected to raising finance.

Cornucopia Trust, which runs a property investment and leasing business, tested exactly how far that narrowing went. The trust financed and refinanced the acquisition of two commercial properties, and as part of those transactions paid upfront "raising fees" — roughly 2% of the value of each loan facility — to the lenders, to gain access to the debt in the first place. SARS disallowed the deduction, arguing that after the 2016 amendment, only interest itself (or charges effectively disguised as interest) could qualify; a raising fee, in SARS's view, was a distinct, one-off transactional cost, not something "similar" to interest at all. The Tax Court disagreed and found for Cornucopia; SARS appealed directly to the SCA.

The SCA, by a 4–1 majority, dismissed SARS's appeal — but its reasoning is worth understanding precisely, because it is not a blanket win for taxpayers. The majority held that SARS's interpretation had swung too far in the other direction: if only interest and disguised interest could ever qualify, the phrase "similar finance charges" would do no work in the statute at all, a result the Act's own wording couldn't have intended. There had to be some category of charge that is not interest itself, but similar enough to it, to fall within the deduction. The Court drew that line functionally rather than formally: a fee qualifies where it is strictly linked to the procurement of the loan, both in amount and objective, and where it compensates the lender specifically for the risk and cost of being deprived of its money — in other words, where the fee is doing the same economic job interest does, just structured as an upfront charge rather than an ongoing rate.

What falls outside that line is just as important as what falls inside it. The Court was explicit that fees charged for the effort of arranging a loan — legal fees, financial advisory fees, and other administrative or advisory costs connected to a financing transaction — remain outside section 24J entirely, even after this judgment. These costs compensate a professional for work done, not a lender for the risk of extending credit, and the distinction the 2016 amendment was designed to draw survives intact for that category. Tax advisors reviewing the judgment have specifically cautioned against reading Cornucopia as reopening the door to deducting every cost incurred in connection with a financing transaction; it reopens the door only for charges that function economically like interest.

Why this matters beyond Cornucopia's own facts: SARS does not appeal to the SCA lightly — the institution generally reserves appeals for cases involving significant legal principle or revenue exposure, which itself signals how seriously SARS regarded the risk of losing this point broadly. With that appeal now lost, Cornucopia is likely to stand as the leading authority on section 24J's post-2016 scope, directly relevant to any capital-intensive, debt-funded business — property investment being the most obvious, but far from the only, example — currently paying or disputing the deductibility of upfront lender fees.

Dumakude v Bidvest Bank has a far stranger fact pattern than its procedural label suggests, and the reasoning behind the final ruling is genuinely instructive for how far SARS's debt-collection powers under the Tax Administration Act actually reach.

The underlying fraud, briefly: Hill Side Trading and Projects CC submitted VAT returns claiming a refund of approximately R3.28 million, which SARS duly paid out on 13 February 2025. SARS subsequently came to believe the refund claim was fraudulent. Separately, and this is the detail that makes the case unusual;

Cuba Dumakude, an individual with no formal connection to Hill Side Trading as a taxpayer, received a payment of R900,000 into his own personal bank account, held with Bidvest Bank. He claimed this was payment for work performed for the company. The court would later note, pointedly, that he produced no invoice or other evidence supporting that claim, that the money landed in a dormant personal account rather than any business account, and that shortly after the deposit he attempted to withdraw large sums in cash and made purchases at various retailers — behaviour the court treated as undermining rather than supporting his position.

SARS issued a section 179 third-party notice to Bidvest Bank, directing the bank to pay SARS from any funds it held for the "taxpayer" — legally, Hill Side Trading, not Dumakude personally. Bidvest, acting on that notice and separately on information from Capitec (the bank where Hill Side Trading itself held its account, and from which the R900,000 had originated), froze Dumakude's account without prior warning to him and paid roughly half the frozen amount to SARS.

Dumakude challenged this on three grounds, and the court rejected all three, for three quite different reasons.

First, he argued Bidvest had acted unlawfully by freezing his account without notice. The court held this was a contractual, not a statutory, question: the relationship between a bank and its customer is governed by the account terms and conditions, and Bidvest's own contract expressly entitled it to suspend or restrict account access, without notice, where it suspected fraudulent or unlawful use — including for anti-money-laundering purposes. SARS's involvement didn't need to independently justify the freeze; Bidvest's own contractual rights already did.

Second, he argued SARS had relied on inadmissible "hearsay" from Capitec in forming its suspicion. The court disagreed, on the basis that Capitec's information came from the bank where the implicated company itself held its account and from which the tainted payment had actually been made — a direct, reliable evidentiary source, not secondhand rumour. The suspicion, the court found, rested on solid and reasonable grounds.

Third, and most legally significant, he argued SARS was required to issue him a final demand before issuing the third-party notice — and it was here that the court's reasoning did the most interesting work. The court held that the section 179 notice had never been issued "against" Dumakude at all. Hill Side Trading remained the actual taxpayer debtor throughout; Bidvest Bank was simply the third party SARS had appointed because it happened to be holding funds connected to that debtor. Because Dumakude was not the taxpayer the notice targeted, any final-demand obligation SARS owed would have run to Hill Side Trading, not to him — making his argument, in the court's own framing, legally moot rather than merely unpersuasive. A third party whose account happens to hold traceable funds cannot claim, in their own right, the procedural protections that attach specifically to the taxpayer debtor.

The practical lesson extends well beyond this case's unusual facts. For any bank customer, receiving funds that trace back to another party's disputed tax matter — even where the customer genuinely believes they're entitled to the money — creates real exposure to a frozen account, and the standard procedural protections built into SARS's collection framework may simply not be available to that customer personally, precisely because they are not the taxpayer of record.

The third case, IT 46306 (IT) [2026] ZATC CPT, was decided by the Cape Town Tax Court on 13 April 2026 and turns on a single, sharp point of timing, with financial consequences to match.

SARS's own official framing of the case describes it as concerning "capital gain tax on transfer or migration of shares in a trust to non-resident trust," relating to a disposal of assets in the 2018 year of assessment — and separate reporting on the same judgment describes the underlying transaction concretely: the trust sold shares valued at almost R1.87 billion, and just three days later, changed its tax residence from South Africa to Namibia. When the South African tax return was eventually filed, no capital gain was declared on the transaction, and no deemed disposal under section 9H of the Income Tax Act — the "exit charge" provision that treats a person's assets as disposed of at market value immediately before they cease to be a South African tax resident — was reported either.

SARS disagreed with that filing position and raised an additional assessment. The core dispute, as SARS's own case summary frames it, was whether the trust (as appellant) had discharged its burden of proving SARS was not entitled to assess it for CGT on the disposal — a formulation that reflects how South African tax disputes actually work procedurally: once SARS raises an assessment, the burden sits with the taxpayer to prove it wrong, not with SARS to prove it right. Separately, the trust sought remission of both the interest and the penalties SARS had imposed, and specifically challenged whether a 10% understatement penalty was correctly applied to the CGT component of the assessment.

The Tax Court found against the trust on every point. It confirmed the additional assessment in full: approximately R241.8 million in capital gains tax, a 10% understatement penalty of roughly R24.2 million, a further R38.7 million provisional tax penalty, and R79.1 million in interest under section 89quat (the provision imposing interest where a taxpayer's actual tax liability materially exceeds what was paid via provisional tax estimates) — plus costs. No remission of interest or penalties was granted.

The legal lesson here is precise, and worth stating exactly: the date on which a transaction accrues for tax purposes can be entirely different from the date cash actually changes hands, or the date a taxpayer's formal residence status changes. Selling an asset while still tax resident in South Africa creates a South African tax event at that moment — a subsequent change of residence days later doesn't retroactively move that gain outside South African tax jurisdiction, and attempting to time an emigration around a major disposal offers no protection if the disposal itself is properly found to have occurred first. For trusts or individuals planning a residence change around a significant transaction, this judgment is a direct, expensive illustration of how narrowly that timing gap can be construed against the taxpayer.

Who must act, and what specifically changes: None of these three rulings creates new legislation — each interprets and applies existing provisions (section 24J, section 179, and section 9H/CGT rules respectively) to specific facts. But all three are now citable authority shaping how similar disputes will likely be resolved going forward.

Financial and operational exposure — Cornucopia: Businesses currently claiming, or considering claiming, deductions for upfront lender fees should test those fees against the SCA's specific standard — strictly linked to loan procurement, in both amount and objective, and compensating the lender for risk — rather than assuming any fee "connected to" a financing transaction now qualifies. Legal, advisory, and administrative fees remain outside section 24J regardless of this judgment.

Financial and operational exposure — Dumakude: Anyone receiving a payment connected, even indirectly, to another party's disputed tax affairs should understand that SARS's third-party notice powers under section 179 can reach an account holder who is not personally the taxpayer, and that the procedural protections (such as a final demand) built into the collection framework may not be available to that account holder in their own right.

Financial and operational exposure — IT 46306: Trusts or individuals planning a change of tax residence around a major disposal should obtain specific advice on the precise accrual date of the transaction relative to the residence change, given how expensive getting this sequencing wrong evidently was in this case — the combined assessment, penalties, and interest here approached R384 million on a transaction where no capital gain was originally declared at all.

Realistic timeline: All three judgments are final and already in effect as legal precedent. There is no phase-in period for any of them.

What remains uncertain or pending: Whether SARS will seek leave to appeal the Cornucopia decision further, to the Constitutional Court, was not confirmed in available reporting. Whether the taxpayer in IT 46306 will appeal the Tax Court's ruling to a higher court is similarly unconfirmed as of this writing.

Does the Cornucopia judgment mean all financing-related fees are now tax deductible? No. The SCA specifically confirmed that legal fees, financial advisory fees, and other administrative costs connected to arranging finance remain non-deductible. Only fees that are strictly and functionally linked to compensating the lender for the risk and cost of extending credit — like the upfront "raising fees" in this specific case — fall within section 24J.

If my bank account gets frozen because of someone else's tax dispute, can I demand SARS follow the same procedural steps it would owe the actual taxpayer? Based on the Dumakude ruling, not necessarily. The court held that procedural protections such as a final demand attach to the taxpayer whose debt is being collected, not to a third party whose account happens to hold connected funds — even where that third party genuinely disputes SARS's right to the money.

Can a bank freeze my account without warning just because SARS suspects fraud? Potentially, yes — but the Dumakude court's reasoning rested on the bank's own contractual terms and conditions, which typically allow a bank to restrict account access without notice where it suspects fraudulent or unlawful use, independent of any separate SARS notice.

If I sell an asset and then emigrate shortly afterward, does the capital gain still get taxed in South Africa? Based on IT 46306, if the disposal itself occurred while you were still a South African tax resident, the resulting gain is a South African tax event at that point, regardless of how soon afterward your residence status changes. The order of events, not just their proximity in time, is what the court focused on.

How large was the total financial consequence in the trust case? Combining the CGT, understatement penalty, provisional tax penalty, and section 89quat interest, the Tax Court confirmed liabilities totalling approximately R383.8 million, plus costs, on a transaction originally filed as generating no taxable capital gain at all.