How to avoid tax penal­ties

The Sars en­vi­ron­ment changes con­stantly, so it’s worth your while to keep up to date


IF YOUR small busi­ness’s in­come tax re­turns are not up to date, now is the time to get your af­fairs in or­der.

From next month, the SA Rev­enue Ser­vice (Sars) will start im­pos­ing “ad­min­is­tra­tive penal­ties” on com­pa­nies that re­ceive fi­nal de­mands to sub­mit re­turns. To avoid penal­ties, com­pa­nies should sub­mit out­stand­ing re­turns be­fore the end of No­vem­ber.

Here are some ways to stream­line com­pli­ance in the years to come, so that your busi­ness can avoid penal­ties and fines for late sub­mis­sions.

1. Straighten out your record­keep­ing.

One of the best ways to stream­line com­pli­ance is to en­sure that you keep your books up to date. Keep de­tailed records about your com­pany’s as­sets, li­a­bil­i­ties, in­ven­tory, ex­penses and pay­ments.

Rather than throw­ing your re­ceipts and slips into a shoe­box, make a habit of scan­ning them im­me­di­ately and cap­tur­ing them in an elec­tronic ac­count­ing sys­tem. A mod­ern ac­count­ing sys­tem will make it sim­ple for you to is­sue in­voices, track out­stand­ing pay­ments, and im­port trans­ac­tions from your bank ac­count fed di­rectly into the ac­count­ing so­lu­tion.

Tip: If you don’t feel you have the ad­min­is­tra­tive skills and dis­ci­pline for day-to-day book­keep­ing, you can en­gage a book­keeper to take care of rou­tine record-keep­ing for you.

2. Ap­point a qual­i­fied ac­coun­tant and tax prac­ti­tioner.

If you are not an ac­coun­tant, it’s wise to ask a qual­i­fied pro­fes­sional to help you pre­pare and file your com­pany in­come tax re­turn (also known as the ITR14). Seek out a firm or pro­fes­sional reg­is­tered with a body such as the South African In­sti­tute of Pro­fes­sional Ac­coun­tants, the South African In­sti­tute of Char­tered Ac­coun­tants, or the South African In­sti­tute of Tax Prac­ti­tion­ers. Your ac­coun­tant should also be reg­is­tered with Sars as a tax prac­ti­tioner.

3. Stay ahead of dead­lines for the year.

There are sev­eral key com­pany tax dead­lines you will need to meet each tax year:

◆ You must file a com­pul­sory pro­vi­sional tax re­turn six months from the start of the tax year and an­other at the end of the tax year.

◆ You may make a vol­un­tary sub­mis­sion and top-up pay­ment six months af­ter year-end.

◆ You must file your an­nual re­turn within 30 days of the date of in­cor­po­ra­tion.

If you are dili­gent about your pro­vi­sional re­turns and pay­ments, it will be easy to meet the an­nual re­turn dead­line be­cause you will have done most of the work. Plus, you will al­ready have made pro­vi­sion for the money you owe the Re­ceiver.

4. Make am­ple pro­vi­sion for

Many small busi­nesses, es­pe­cially those in their early stages, sur­vive month-to-month. If you are head­ing for a cash-flow cri­sis, do not use money you owe Sars, or VAT, pay­roll taxes or in­come tax to get over the bump.

Try to build a cash re­serve for emer­gen­cies rather than get­ting into the habit of us­ing money owed to Sars to bridge short­falls be­tween in­voic­ing clients and re­ceiv­ing pay­ment.

This can be chal­leng­ing, be­cause small busi­nesses have to book rev­enue in their fi­nan­cial state­ments be­fore they re­ceive pay­ment.

5. Ap­proach Sars be­fore Sars ap­proaches you.

If you haven’t filed cor­po­rate in­come tax re­turns for a while, you may be con­cerned that you owe Sars a lot of money.

This might be the case even if your com­pany has be­come dor­mant. Work with an ac­coun­tant as soon as pos­si­ble to es­tab­lish what your tax li­a­bil­ity could be, and ap­proach Sars with­out de­lay.

6. Stay abreast of the lat­est Sars news.

The tax en­vi­ron­ment is con­stantly chang­ing as Sars tight­ens poli­cies and reg­u­la­tions.

Visit the Sars web­site once a month.

Viresh Harduth is the vice-pres­i­dent: New Cus­tomer Ac­qui­si­tion (Start-up and Small Busi­ness) for Sage Africa & Mid­dle East.

the money you owe Sars for in­come tax.

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