Not too many years ago the state of South African taxation was very different.
The antiquated system in use often took years to identify, track down, and achieve compliance by recalcitrant taxpayers. Many taxpayers’ affairs were a number of years in arrears. Penalties for non-submission were non-existent, and no interest was payable for the resultant gratuitous credit used by certain taxpayers.
Once compelled to do so, after exhausting all available extensions and the patience of the revenue office, taxpayers submitted paper-based income tax returns, real people called assessors checked the returns and assessed compliance with the Income Tax Act. If anything looked out of line, or if proper supporting documentation including financial statements had not been submitted, a letter requiring further particulars or explanations would be mailed to the taxpayer requesting response within 21 days.
After correspondence back and forth, often involving begging and cajoling responses, and eventually demands, an assessment was eventually issued, paid, and the taxpayer could assume that his obligation for taxes for that year had been met. If a discrepancy in his return had not been detected he could probably relax until the next year. Much "tax advice" was to be had at the golf club or local pub.
Currently, a few years after introducing e-filing, SARS have brought us closer to self-assessment, in terms of which the responsibility for assessing taxes has been virtually transferred to the taxpayer. If he gets it wrong, penalties, interest, prosecution, criminalisation and even asset forfeiture could result.
The days of getting advice from your mates and doing it yourself, have gone. Within a day or so of e-filing your return, a computer has generated an assessment and taxes are due. No more Mr Nice Guy!
Linking computer systems means that SARS can call for reconciliations between information in VAT and income tax accounting systems, or salary records reconciling to employee costs claimed in financial statements, or lifestyle audits can highlight under-declarations of income.
So, we are led to ask our clients – can you afford to get it wrong? Every director should ask himself:
- Do you know that your tax affairs are in order?
- Would you qualify for a tax clearance certificate at short notice? eg for a tender?
- Are you exposing your company to administrative penalties?
- Are you claiming all deductions to which you are entitled?
- Could your company be liable for employee taxes not deducted, for example on fringe benefits?
- Would a SARS audit leave your company impoverished?
- What about areas no covered by the statutory audit?
- Can you really sleep peacefully at night?
SO HOW CAN WE HELP YOU?
Meredith Harington has developed a comprehensive TAX HEALTH CHECK.
On appointment we will review your tax records and furnish you with a report detailing your company's level of compliance and highlighting potential tax saving areas and recommendations for improvement. Our review will encompass:
A holistic and complete review of all the major areas of tax compliance, including:
- Income tax: validity of deductions claimed, cut-off, "grey" areas of expenditure, provisions and accruals, receipts in advance
- VAT: are the processes sound and are staff properly trained to claim all valid inputs?
- Fringe benefits: are staff receiving deemed fringe benefits that should be subject to PAYE and VAT?
- Payroll Matters, including PAYE, UIF and SDL
- Directors' drawings: potential fringe benefit and dividends tax implications
- A review of the "SARS HOT-SPOTS" ie the areas that raise red flags
- More in-depth and detailed than that required by a statutory audit
- A must-have if you should choose to go the independent review route
- Giving our clients peace of mind that there are no unpleasant skeletons in the cupboard