Maguire v Commissioner for the South African Revenue Service

The appellant, Robin Frank Maguire, received payments of R350 000 (1992), R1 250 000 (1996) and R3 000 000 (1998) under successive restraint of trade agreements concluded with companies in the Macmed group and later International Latex Products (Pty) Ltd. The agreements restrained him, during and after employment, from competing with the group’s business. SARS assessed the 1996 and 1998 payments as income, contending that the later agreements were not genuine restraints of trade but disguised remuneration. The Tax Court held the 1992 payment to be capital, but found the 1996 and 1998 payments to be income. Maguire appealed to the Supreme Court of Appeal.

The appeal was upheld with costs. The Tax Court’s order was set aside. The assessments for 1996 and 1998 were referred back to SARS for reassessment on the basis that the amounts of R350 000, R1 250 000 and R3 000 000 did not form part of the taxpayer’s gross income.

The case reaffirms pre-2000 South African tax law principles that payments for restraints of trade are capital in nature, even where restraints are successive or similar in wording. It clarifies that renewed restraint undertakings can constitute fresh sterilisation of income-earning capacity, and it limits SARS’s ability to recharacterise such payments as remuneration absent evidence.