Sars lifeline can help indebted SMES
IN THESE uncertain times many small and medium enterprises (SMES) do not have the financial means to settle large debts that have accrued to the South African Revenue Service (Sars), be it in light of the Covid-19 pandemic or due to long-outstanding debts.
Sars has spent the past year implementing collection measures more forcibly than before. Like all strategic movers, Sars has been biding its time, focusing on the most prevalent debts, and working its way through every non-compliant taxpayer, calculating interest upon interest and imposing penalties across the board.
Sars has in recent months greatly increased the pressure of its collection measures, with a final demand being sent to the company or its representative taxpayer, for any and all tax liabilities. Sars’s follow-through has also become more drastic, with the final demand being ignored as previously would, and Sars going straight for the jugular with a third party appointment or sheriff’s attachment in lieu of the outstanding amount. As a last port of call, the most drastic collection measure, a forced liquidation, may be implemented by Sars.
Companies that find themselves in this situation, feeling like they are staring down the barrel of a gun, wondering how they are going to pay this month’s salaries, do have solutions available, but none so favourable as an application for a compromise of tax debt. This is a ceasefire which Sars has, in recent times, become more amicable towards, showing great compassion for the financially constrained SME.
If a business has received a letter of demand from Sars in respect of missed PAYE or VAT payments, action must be taken immediately to avoid the tax debt trap. Tax debt, purported or not, will not go away, but will only spiral out of control.
Given the unpredictable nature of the pandemic and its devastating effect on the economy, companies should not jump straight to the worst-case scenario and commence with liquidation proceedings. This should in essence be any company’s last resort and is preventable by means of engaging Sars in compromise negotiations.
In order to protect yourself from Sars, it remains the best strategy that you always ensure compliance. Where you find yourself on the wrong side of Sars, there is a first-mover advantage in seeking the appropriate tax advisory assistance, to ensure the necessary steps are taken to protect both yourself and your bank balance from paying the price for what could be the smallest of mistakes. However, where things do go wrong, Sars must be engaged legally, and we generally find them to be agreeable to the utmost where a correct tax strategy is followed.
All correspondence received from Sars should be immediately addressed by a qualified tax specialist or tax attorney, which will not only serve to safeguard the taxpayer against Sars implementing collection measures, but the taxpayer will also be correctly advised on the most appropriate solution to ensure their tax compliance.