SARS now outsourcing Debt Collection

In an attempt to recover outstanding debt worth over R15-billion, the South African Revenue Service (SARS) has outsourced confidential taxpayer information from its debt book to selected service providers. (See notification letter). The outsourcing project, which was implemented on 1 June 2016, appointed the following service providers: CSS Credit Solutions, NDS Credit Management and Trifecta Capital.

The unpaid taxes include Pay As You Earn (PAYE) and Unemployment Insurance Fund (UIF) and Skills Development Levy (SDL) contributions which have remained outstanding for longer than four years by private companies and individuals.

We strongly urge you to contact our office for assistance should SARS or any of their appointed debt collectors contact you regarding an old debt.

Contact us here now

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Nwanda Internal News (August 2016)

DAYSAwesome Reward goes to:

Work performance:

  • Shane Short – Exceeded expectations at the Master’s Office

Welcome back to Samantha Goodrich:

We are pleased to welcome Samantha back to the office after 4 months maternity leave.

Internal promotions:

Congratulations to the following staff on their promotion:

  • Dean du Toit, Accounting Manager
  • Proffessor Mafela, Audit Manager – Erleen Coetzees Team
  • Daniel Adlam, Junior Manager – Bob Borrills Team

CTA Students:

The following staff will vacate the office at the beginning of September to write the CTA examinations.  All  the best and make us proud and most importantly – yourself!

  • Iris Janse van Rensburg
  • Sifiso Tshabalala
  • Daniel Adlam
  • Teboho Magodiele
  • Sadiya Mansoor
  • Esmerelda Lottering

Farewell to a staff member:

We bid farewell to the following staff member:

  • Nicole Pretorius

We wish her success in her future endeavours.

How to increase your exam performance:

Tests and exams are an inevitable part of learning. They’re not there to trip you up, but to measure how well you have understood the subject. Even if you know the content well, there are ways to help yourself perform better on the day.

Some people thrive on exams, others are less fortunate. A disciplined approach will make your task easier, and hopefully – improve your results.

Here are some tips that you can try to help you improve your exam performance.

Before the exam

  • Your success starts before you even sit down for the exam, so ensure that you have enough rest the night before. Don’t cram up to the last minute, as that only adds to your stress
  • Look at previous tests, and analyse how well you did, and where there could be room for improvement
  • Always arrive early for an exam. Arriving late will just add to your stress levels
  • Arrive with a good attitude: be positive, smile, and be confident
  • If you suffer from exam anxiety, read our article on how to manage exam stress.

During the exam

  • Read the directions carefully, and slowly. You don’t want to make a careless mistake
  • Read through the whole exam before answering, to give an overall picture of your task
  • Answer easy questions first; that way you won’t get stuck on a tricky question and run out of time
  • Look for the key words in the question: there are usually one or two that will give you a clue
  • Don’t leave when you’re finished; review all your answers and double-check that you’ve answered all questions correctly
  • Double-check your spelling, punctuation and grammar.

After the exam

  • Be positive: think about those tasks you know you performed well on
  • Avoid a ‘post mortem’. Discussing with other students how well you and they did, or did not do, will only drag you down
  • After the exam, don’t go back to study or work right away: give yourself some time off to relax doing something you enjoy.

Successful High Energy Training with Colin Hall:

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Transactions required to be reported to SARS in terms of the Tax Administration Act

Certain transactions are required to be reported to the South African Revenue Service (‘SARS’) as and when entered into (section 37 of the Tax Administration Act, 28 of 2011 (‘the Admin Act’)).  These are referred to as ‘reportable arrangements’, and qualify as such when an ‘arrangement’ (defined as including any transaction, agreement, scheme or understanding) either meets one of the criteria set out in section 35(1)(a) to (e), or if specifically listed in a public notice issued by the Commissioner for SARS.  This article is concerned only with the former.

Failure to report a ‘reportable arrangement’ will result in a monthly penalty being levied against non-compliant taxpayers ranging from between R50,000 to R300,000 per month (section 212), for up to 12 months.  The purpose for requiring taxpayers to report certain transactions is obvious:  to allow SARS to monitor transactions on an ongoing basis which it considers to exhibit potential traits of tax avoidance.

Section 35(1) determines that arrangements which exhibit any one of the below criteria qualify as a reportable arrangement.  These are arrangements which:

(a) contain provisions in terms of which the calculation of interest, finance costs, fees or any other charges is wholly or partly dependent on the tax treatment of that arrangement;

(b) have any of the characteristics contemplated in section 80C(2)(b) of the Income Tax Act, 58 of 1962, or substantially similar characteristics (which include round trip financing, involving an accommodating or tax indifferent party in the arrangement or if the arrangement contains elements which offset or cancel each other);

(c) give rise to an amount that is or will be disclosed by any participant as:

  1. )  a deduction for purposes of the Income Tax Act but not as an expense for accounting purposes; or

(ii) revenue for accounting purposes, but not as gross income for purposes of the Income Tax Act;

(d) do not result in a reasonable expectation of an accounting pre-tax profit for any participant; or

(e) result in a reasonable expectation of an accounting pre-tax profit for any participant, but which is less than the value of the tax benefit to that participant if both are discounted to present value at the end of the first year of assessment when the tax benefit is created.

Irrespective of the above, even if an arrangement would qualify as a reportable arrangement in terms of the above, section 36 of the Admin Act lists various criteria which, if met, would render an arrangement an ‘excluded arrangement’ whereby such transactions need not be reported to SARS.  Moreover, in terms of the public notice issued by the Commissioner on 16 March 2015 in Government Gazette no. 38569 as Notice 212, a transaction would not be reportable in terms of the above criteria only if the tax benefit arising from the arrangement for all persons involved would not exceed R5 million.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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SARS prescription

Imagine the following scenario: a taxpayer named Andrew is on his annual vacation for four weeks. On the fifth day of his vacation, he is lying carefree in the sun with his toes wiggled into the warm beach sand.  A thought crosses his mind: perhaps he must check his email for a change.

Fast forward eight hours: Andrew logs into his email. He gives the emails in his inbox a quick scan. Suddenly his stomach cramps. His heart beats faster. His hands start to sweat. His eye caught an email from SARS. Andrew opens the email and then the attachment reluctantly. The attachment contains a letter from SARS stating that they are going to re-assess his income tax for a specific tax year. The assessment for that particular tax year has been issued more than four years ago. Can SARS do this?

To be subjected to the prescription (or re-opening) of an assessment that has been finalised a few years ago already, is something taxpayers don’t even want to contemplate. However, in terms of the new Tax Administration Act, 28 of 2011 (TAA) SARS may go back more than three tax years into the past, prescribe and re-assess a tax return but only if the Commissioner is objectively, based on the facts, satisfied that both the following statutory requirements are met:

  • There was fraud, misrepresentation or non-disclosure of material facts.

“Fraud” is defined as an unlawful act committed with the intention of misleading another person. The misleading information must cause the other person to act differently than they would have acted if they were not given the misleading information.

The legal meaning of “misrepresentation” refers to a false statement made by a person, regardless of whether the statement is made negligently, fraudulently or innocently. Misrepresentation does not include the expression of an opinion or an interpretation of law.The taxpayer must have made a positive statement which contained one or more facts that were untrue.

Note that innocence cannot be pleaded as an excuse for misrepresentation. Taxpayers thus have to make sure about the content of any statement they make regarding their tax affairs before making such a statement.

“Non-disclosure” means failure to reveal a fact if there is a duty to disclose it. Whether or not there is an intention to conceal it is irrelevant.

  • The above fraud, misrepresentation or non-disclosure of the material facts was the direct cause that the taxpayer had been assessed for a lower amount of tax than if the taxpayer had disclosed these material facts referred to in section (i) above, to SARS.

There must be evidence of a direct link between the non-disclosure or misrepresentation of the material facts and the taxpayer paying too little tax. If the fraud, non-disclosure or misrepresentation of the material facts did not cause the taxpayer to be liable for less tax than he was assessed for without the material facts, the second requirement listed above is not met and SARS shouldn’t be able to apply this section of the TAA.

Generally the onus of proving that income is not taxable or that an expense is tax-deductible rests with the taxpayer. However, if SARS wants to apply the provisions of this section of the TAA, the onus of proving that the above requirements are met, rests with the Commissioner.

It seems that if the fraud, non-disclosure or misrepresentation of material facts did take place but did not cause the taxpayer to pay less tax than if SARS had been in possession of these material facts, and SARS would have assessed the taxpayer in exactly the same way as with the original assessment, despite SARS becoming aware of the material facts now, SARS cannot claim that the under-assessment was due to that fraud, non-disclosure or misrepresentation of the material facts.

If SARS wants to issue an additional assessment on the basis of requirement (i) above but requirement (ii) is not met, the taxpayer can deal with this situation using the objection and appeal provisions available.

In the light of SARS’s tools to go back and prescribe assessments for old tax years, it might be prudent to keep tax records for longer than the required retention periods prescribed by SARS.

Reference List:

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

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July 2016

DAYS


Etiquette

Awesome Reward goes to:

Work performance:

  • Roald van der Heiden – Exceeded expectations on the Metalsa audit
  • Fatima Wadia – Fighting the brave SARS battle and securing a VAT refund for a client

Academic performance – Successfully completed all the modules enrolled for with distinctions:

  • Hennie de Beer – 3 distinctions
  • Sean Bushe – 3 distinctions
  • Rabia Sarwar – 2 distinctions
  • Andre Strydom – 1 distinction

We would also like to make mention of the following staff who successfully completed all the modules they enrolled for but unfortunately did not receive any distinctions.  We hope that during the next semester you will obtain distinctions to qualify for the R550 awesome reward:

  • Divan Dixon – 6 out of 6 modules
  • Natasha Bothma – 5 out of 5 modules
  • Sikhanyile Noholoza – 4 out of 4 modules

Farewell to staff members:

We bid farewell to the following staff member:

  • Itumeleng Moshayi

We wish her success in her future endeavours.

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Cost management: 7 tips for cutting business expenses

It is important for every business owner to make a maximum profit, both through sales and by maintaining strict financial discipline within the company. Implement sound practices from the start, and you will reap the benefits later. These seven tips on cost management will be beneficial for your small enterprise.

  1. Watch expenses from day one.

You might think that overspending during the first few months after opening your doors is forgivable, but discipline is needed right from the start. Spend money only on the necessary and always look for cheaper alternatives. Money saved now will reap rewards later.

  1. Don’t confuse business and personal expenses.

When getting ready for tax season, file your personal and business expenses separately. Be honest and keep your accounting books clean to avoid enquiries from SARS.

  1. Keep detailed and accurate purchasing records.

Accurate record keeping helps you manage your business expenses effectively. Record every purchase, from the smallest to the largest, so that it becomes the custom for everyone in the company. In this way you can see where your money is going and you can cut back if necessary.

  1. Shop around for a low-interest credit card.

As a small business there is the possibility of acquiring a credit card with low interest rates, so visit different banks and find the right one for you. Your card should assist you in expanding your business without the worries of growing debt from high interest rates. 

  1. Run reports early and often.

Review your expenses on a weekly basis so that any additions will be picked up immediately. Do this right from the start and include every aspect of your business, including salaries and any new expenses you might have incurred. This is easier than having to backtrack later.

  1. Invest in technology that will last.

Don’t try to save money on inferior technology; rather buy better quality and save on repairs and replacement costs in the long run. You will get more value from the better product and it is also tax-deductible.

  1. Continue financial responsibility.

The skill of budgeting effectively and saving money is imperative for launching a business. Don’t stop saving money after a while; continue to do so and expect the same from your employees. Growing a business is only possible when you accept your financial responsibility. By using these cost management tips your business will become financially more flexible as it expands.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Objecting to an assessment

One of the risks of not using a tax professional to attend to one’s tax affairs arises when SARS assesses an individual’s income tax return.  Quite often, a return submitted is assessed incorrectly, or on a basis in terms of which SARS is disputing certain submissions made by the taxpayer in filing his or her (or even a family trust or company’s) income tax return.

It is then important to have an experienced tax professional at your disposal who is aware of the specifically legislated and prescribed dispute resolution rules that are required to be followed in order to object to an assessment with which the taxpayer disagrees.  The benefit of using a tax professional becomes even more pronounced when considering that individuals without tax experience and knowledge very often do not understand correspondence issued by SARS (and which would be informing the taxpayer of an adverse assessment for example being issued), and further that they can check assessments issued to ensure that these have indeed been issued on the basis on which the relevant return has been filed.

Various requirements exist for a valid objection to be lodged with SARS, and these are prescribed in terms of Rule 7(2) of the Rules published in terms of section 103 of the Tax Administration Act, 28 of 2011, which govern the dispute resolution process where SARS is concerned.  The requirements for a valid objection include that the objection be lodged in the prescribed format and by using the correct form, and that the objection be lodged within 30 business days from the date of the assessment issued.

If a taxpayer is unsure of the basis on which SARS would have issued an assessment, the taxpayer is entitled to first request reasons from SARS for the assessment issued in order to allow them to consider whether lodging an objection would be necessary or not to dispute the assessment (Rule 6).  These reasons, if requested, must be clear enough to allow the taxpayer to understand why SARS would have issued an adverse assessment and to then be able to lodge an objection against the assessment in question if required.  A request for reasons too (as is the case for an objection) needs to be submitted to SARS within 30 business days from the date of the assessment, where after the objection must be lodged within 30 business days of these reasons being provided to the taxpayer (and which SARS is obliged to provide, if requested, within 45 business days from receipt of the request for reasons from the taxpayer).

The Rules further make provision for an unsuccessful objection to be appealed to the Tax Board or the Tax Court, or for the Taxpayer and SARS to enter into ADR (‘alternative dispute resolution’) to have the dispute resolved.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Tips to get the most out of your short term insurance

We take out short term insurance for peace of mind. You pay your premiums regularly and feel safe because you know you are covered should any of your insured assets become damaged. But do you really have the insurance cover you think you have? Are you sure you will be able to claim if your assets should get damaged?

If you pay short term insurance premiums, you want to get the best value for your money and protect yourself against nasty surprises when you need to make a claim. By taking out short term insurance, you undertake to fulfil certain requirements in exchange for insurance cover. If you do not fulfil these requirements, you may not be able to claim for damages against your insurance policy.

Application tips

When you apply for insurance, the insurance company or broker must give you the following information:

  • Proof that they are licensed under the FAIS Act;
  • Policy details: contact details of the insurer, exactly what is covered and excluded, amount of your premium, whether your premium increases automatically every year or not, how to claim; and
  • Inform you that if you pay your premiums late, you will still be insured as long as you pay the outstanding premiums within 15 days. If you pay after the 15th day, you will have no insurance cover.

If you apply through a call centre, ask for the transcript of your phone call for your records.

Make sure you give accurate information. If it’s not accurate, it is false information, even if you thought it was the correct information.

Make sure you play open cards. If you are not sure whether the insurer needs certain information, ask them. By keeping quiet, you also give inaccurate and false information.

After the application

Motor vehicle insurance is only valid if your vehicle is roadworthy. The responsibility rests on you to check your insured vehicle regularly to ensure that it stays roadworthy e.g. make sure there is enough tread on the tyres as required by law. Also, remember to contact your insurer at least once a year to reduce the insured value of your vehicle as motor vehicles’ value normally decline over time. By reducing the insured value, you will save on premiums and avoid being over-insured.

Household content insurance covers everything inside your house. House contents are normally insured at replacement value. As the price of furniture, clothing, etc.  increases over time, you need to contact your insurer periodically to adjust the replacement value of your home’s contents to prevent becoming under-insured.

Home owners insurance covers the physical structure (building) of your house. Property is normally insured at the rebuilding value of the structure. Take note that the rebuilding value of a property is usually lower than its market value. Any cost incurred to maintain the building’s structure is generally not covered by insurance. An insured property owner must do adequate maintenance on the property. If a property owner neglects to do the necessary maintenance and consequently suffers a loss,  he/she will not be able to claim from the insurer for damage suffered as a result of inadequate maintenance. As most properties’ rebuilding value increase over time, you need to contact your insurer from time to time to increase the insured value of your house.

All risks insurance covers movable items that are taken out of the house e.g. cell phones. Most policies have a claim limit up to which movable items don’t have to be specified in your insurance policy. Any claim for an item with a value above the limit will only be considered if the item was specified by informing your insurer about any identifiable details of the item which can help to identify that item e.g. the brand, colour or serial number.

To enjoy maximum protection under your short term insurance policy, you need to do three things. Firstly, pay your premiums on time. Secondly, maintain insured assets as agreed with the insurer. Lastly, periodically assess whether the insured value of assets covered by your insurance policy, is still reasonable. If there are material changes in the replacement value of any of these assets, instruct your insurer to adjust the insured value of such assets. If you do these three things, you can have the peace of mind that you have maximum protection under your short term insurance policy.

Reference List

Accessed on 18 September 2015:

  • SAIA Consumer Education Booklet written by Denis Beckitt

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Tax penalties: Understatement penalties in the Tax Administration Act

1 2 3 4 5 6
Item Behaviour Standard case If obstructive, or if it is a ‘repeat case’ Voluntary disclosure after notification of audit or investigation Voluntary disclosure before notification of audit or investigation
(i) ‘Substantial understatement’ 10% 20% 5% 0%
(ii) Reasonable care not taken in completing return 25% 50% 15% 0%
(iii) No reasonable grounds for ‘tax position’ taken 50% 75% 25% 0%
(iv) Gross negligence 100% 125% 50% 5%
(v) Intentional tax evasion 150% 200% 75% 10%

It is not clear how a taxpayer’s behaviour is to be classified for purposes of considering at which rate an understatement penalty is to be imposed, or if it is even possible that certain taxpayer behaviour may not even fall within the table to begin with.  Suffice it to say that in terms of section 102(2) of the Tax Administration Act, the burden of proving whether the facts on which SARS based the imposition of an understatement penalty is upon SARS.

In terms of section 222, the penalty may only be levied where an ‘understatement’ is present, being any prejudice to SARS or the fiscus as a result of:

  1. A default in rendering a return;
  2. An omission from a return;
  3. An incorrect statement in a return; or
  4. Where no return was required, the failure to pay the correct amount of tax.

To calculate the penalty levied, the applicable percentage in the above table is applied to the shortfall amount, being the tax effect in question for which the taxpayer is penalised.  For example, if an income tax deduction claimed by a taxpayer is disallowed by SARS which seeks to penalise the claiming of the deduction, the applicable penalty percentage is applied to the tax effect that the deduction would have had had it been allowed.

Taxpayers are enabled through section 224 to object against the imposition of an understatement penalty.  What is further noteworthy is that, in the event that a penalty is levied for a ‘substantial understatement’, the penalty must be remitted by SARS if the taxpayer was in possession of a positive tax opinion from an independent registered tax practitioner supporting its tax position.  It therefore makes sense, if only to mitigate against the levying of penalties, to obtain a tax opinion from a registered tax practitioner prior to entering into a transaction.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Objecting to an assessment

One of the risks of not using a tax professional to attend to one’s tax affairs arises when SARS assesses an individual’s income tax return.  Quite often, a return submitted is assessed incorrectly, or on a basis in terms of which SARS is disputing certain submissions made by the taxpayer in filing his or her (or even a family trust or company’s) income tax return.

It is then important to have an experienced tax professional at your disposal who is aware of the specifically legislated and prescribed dispute resolution rules that are required to be followed in order to object to an assessment with which the taxpayer disagrees.  The benefit of using a tax professional becomes even more pronounced when considering that individuals without tax experience and knowledge very often do not understand correspondence issued by SARS (and which would be informing the taxpayer of an adverse assessment for example being issued), and further that they can check assessments issued to ensure that these have indeed been issued on the basis on which the relevant return has been filed.

Various requirements would exist for a valid objection to be lodged with SARS.  These include that the objection be lodged in the prescribed format and by using the correct form, and that the objection be lodged within 30 business days from the date of the assessment issued.

If a taxpayer is unsure of the basis on which SARS would have issued an assessment, he or she is further entitled to first request reasons from SARS for the assessment issued in order to allow them to consider whether lodging an objection would be necessary or not to dispute the assessment.  These reasons, if requested, must be clear enough to allow the taxpayer to understand why SARS would have issued an adverse assessment and to then be able to lodge an objection against the assessment in question if required.  A request for reasons too (as is the case for an objection) needs to be submitted to SARS within 30 business days from the date of the assessment, whereafter the objection must be lodged within 30 business days of these reasons being provided to the taxpayer (and which SARS is obliged to provide, if requested, within 45 business days from receipt of the request for reasons from the taxpayer).

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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