Nwanda internal news (Aug/Sep)

 1. Long service awards:

Congratulations to Liza Hlatswayo who has been employed by Nwanda for 20 years and Denise Behenna for 15 years.  We trust you enjoyed your tax free gift and tasty lunch at Werner’s Bistro

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2Awesome Rewards:

Francis Venter – Going the extra mile

Sadiya Mansoor and Andre Strydom – For consistently good work

Divan Dixon – Delivery of quality work

Sharlott Modibedi – Always assisting with a smile

Nicole Pretorius – Stepping up while her manager was on leave

3. New Employees:

We are proud to introduce a new Employee:

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Kirsten Campbell – 6 month accounting contract

 

 

 

 

 

 

 

 

 

4. Office closure:

We wish to notify our clients that our offices will be closed from 21 December 2015 and will reopen on 4 January 2016.

5. Examinations – CTA and Undergraduates:

To all our staff writing their examinations, you will be missed. As always, make us proud.

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6Love is in the air:

Congratulations to Anastasia Pillay and Lenzel Naidoo, who were married on 10 August 2015.

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Congratulations to Carmen Risk and Paul Maroun, the couple were engaged on 29 August 2015.

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Why SARS requests supporting documents

Most taxpayers know that sinking feeling when SARS requests supporting documents from them. Which supporting documents must I submit? Am I being audited? Did I make a mistake on my income tax return? Will SARS send me to jail?

Why did SARS choose me?

SARS remains secretive about the way they go about selecting tax returns for verification and auditing. Nobody is exactly sure how SARS determines from which taxpayers they will request supporting documents. SARS has only disclosed that they make use of automated systems which randomly selects tax returns for review and/or determines a risk score for taxpayers based on their tax compliance history and third party data that may be in SARS’s possession.

Am I being audited?

A request for supporting documents does not necessarily mean a taxpayer did something wrong and is being audited by SARS. When SARS requests supporting documentation, they usually do a verification of the taxpayer’s income tax return to confirm that the submitted return agrees with the supporting documents. After the verification process is complete, SARS may decide to do a tax audit. The verification process and an audit are two different processes.

Being selected for an audit does not mean that the taxpayer broke any tax laws. SARS will select taxpayers who have not contravened any tax laws but whose behaviour indicates that the taxpayer might perhaps have transgressed one or more tax laws.

Which tax deductions may trigger requests for supporting documents by SARS?

SARS tends to request supporting documents in certain areas where claimable tax deductions can easily be inflated.

  • Repairs and maintenance claimed against rental income

Where a taxpayer claims repairs and maintenance expenses against rental income, SARS may request supporting documents. SARS can go as far as doing site inspections at the rental property to confirm that the repair and maintenance work has indeed been done on the rental property and not on the house of the owner of the rental property.

  • Claim for home office expenses

SARS wants proof of expense items claimed, for example municipal accounts, cleaning expenses and insurance. To be able to deduct home office expenses, the home office and office equipment must be used exclusively for business purposes. SARS has been known to do site inspections to confirm the exclusive use of a home office for business activities.

  • Deductions against fringe benefits like travel allowances and company cars

In order for SARS to allow the travel deduction, the taxpayer must submit a travel logbook showing kilometres travelled for business purposes.

  • Claim for medical expenses

SARS is looking for proof of payment of qualifying medical expenses paid out of the taxpayer’s own pocket during the year of assessment under scrutiny. A medical invoice must be submitted together with some kind of proof of payment in order for SARS to allow the deduction.

What happens if I do not submit supporting documents when SARS requests them?

If a taxpayer cannot submit the relevant documents, SARS will not be able to verify claims on the taxpayer’s tax return and the deductions will not be allowed.

When might SARS decide to audit me?

Some of the reasons why SARS might decide to audit a taxpayer’s tax affairs are:

  • The taxpayer’s behaviour in the past regarding his/her tax affairs.
  • The complexity of a taxpayer’s tax affairs.
  • SARS found material inconsistencies or irregularities while verifying a tax return against supporting documents.

An audit is a more in-depth process than verification and involves an evaluation (as opposed to verification as in the case of a request for supporting documents) of the information that was submitted in a tax return.

Providing SARS with supporting documents when requested to do so places an additional administrative burden on the taxpayer. However, requests by SARS for supporting documents also protect the honest taxpayer by ensuring that more taxpayers pay their dues.

This article is a general information sheet and should not be used or relied on 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. 

Employer interim reconciliation

In the past SARS required the Employer Reconciliation to be done every twelve months. A few years ago SARS introduced the Employer Interim Reconciliation in addition to the annual Employer Reconciliation.

The Employer Interim Reconciliation have the same requirements as the Employer Reconciliation, with two exceptions:

  1. The Interim Reconciliation is completed for six months only, and
  2. The tax certificates generated during the Interim Reconciliation are only submitted to SARS and not distributed among employees, except in certain circumstances as set out in the table below.

The major benefit of performing the Employer Interim Reconciliation is that it decreases the pressure on employers with their Employer Reconciliation at the end of the tax year, as only six months have to be reconciled for each reconciliation.

The table below shows the major differences between the Employer Interim Reconciliation and the Employer Reconciliation, followed by some tips on how you can prepare for the next Employer Interim Reconciliation.

Requirement Employer

Interim Reconciliation

Employer

Reconciliation

Periods included for 2015/2016 tax year 1 March 2015 – 31 August 2015 (6 months) 1 March 2015 – 29 February 2016 (12 months)
Submission deadline for 2015/2016 tax year 30 October 2015 To be announced by SARS (normally 3 months after the end of the tax year i.e. 31 May 2016)
Failure to submit or late submission Penalty of 10% of total amount of Employees’ Tax per month that employer fails to submit a complete reconciliation Penalty of 10% of total amount of Employees’ Tax per month that employer fails to submit a complete reconciliation
Failure to indicate taxable fringe benefits on employees’ tax certificates Penalty equal to 10% of the cash equivalent of the taxable fringe benefit Penalty equal to 10% of the cash equivalent of the taxable fringe benefit
Give IRP5/IT3(a) certificates to employees No, except if the employee stops working for the employer e.g. if the employee resigns or retires, or if the employer closes down its business between 1 March 2015 and 31 August 2015 Yes, but only after an acceptable Employer Reconciliation has been submitted to SARS
Deadline for giving IRP(5)/IT3(a) certificates to employees Not applicable, except if the employee stops working for the employer during the period from 1 March 2015 to               31 August 2015 To be announced by SARS but after submission deadline for Employer Reconciliation and usually before opening of tax season for individuals

Tip 1: Start preparing now

Get a jumpstart on the reconciliation process by starting to confirm employees’ personal details. Draw up a confirmation form of personal details needed to complete employees’ IRP5/IT3(a) tax certificates. These forms should be completed and signed by each employee and kept in the Employer Interim Reconciliation file as part of the working papers. The details that must be confirmed with employees  are the following:

  1. First two names and surname
  2. Date of birth
  3. South African ID number or Passport number and name of country which issued the passport
  4. Income Tax reference number
  5. Contact details:
    • Postal address
    • Residential address (including postal code)
    • Cellphone number
    • Home telephone number
    • Work telephone number
    • Fax number
    • E-mail address
  6. Banking details:
    • Bank account number
    • Bank account name
    • Type of account e.g. savings or cheque
    • Branch name
    • Branch number
    • Indication of whether it is their own bank account, a joint bank account or a third party bank account

Tip 2: Use the latest version of easyFile

Make sure that you use the latest version of easyFile when doing the Employer Interim Reconciliation as well as the Employer Reconciliation, as reconciliations and tax certificates done on previous versions of easyFile software will be rejected by SARS. Check the SARS website for updates and the most current version of easyFile software.

Employer reconciliations don’t necessarily need to be a nightmare. Some timely preparation will go far to make the reconciliation process smoother and less stressful.

If the above article raised any questions in your mind please do not hesitate to contact our office. We look forward to the opportunity to assist you.

This article is a general information sheet and should not be used or relied on 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. 

Reference List:

  • sars.gov.za

The obligation to provide access to certain information about your business

The Promotion of Access to Information Act (PAIA), No 2 of 2000, was enacted in an effort to foster a culture of transparency and accountability in the public and private sector. It gives effect to the constitutional right of access to any information held by the State or any other person and  that is required for the exercise or protection of any rights of any person.

This implies that any person whose rights may be affected may request any of the prescribed information as defined in the Act from a public or private body by following the applicable procedures. The public or private body is then legally compelled to provide such information in the prescribed manner.

Section 51 of this Act requires the head of a private body to compile, within six months after the commencement of this section of the Act or within six months after the establishment of the private body, a manual containing certain prescribed information, such as:

  • postal and street address, phone and fax numbers and email address of the private body
  • the latest notice regarding the categories of records of the private body which are available without a person having to request access in terms of the Act
  • a description of available records generated by the private body, indicating which records are automatically available and which records are available on request
  • the request procedure to be followed in terms of the Act, as well as the applicable fees
  • a statement confirming the head of the public body
  • other information as prescribed by the Act

This manual should be updated every time a change in the prescribed information occurs and must be:

  • submitted to the Human Rights Commission
  • submitted to the controlling body of which the private body is a member (if applicable)
  • published on the privatebody’swebsite (if applicable)

A private body is defined as:

(a) a natural person who carries on any trade or business or profession
(b) a  partnership that carries on any trade or business or profession
(c) any former or existing juristic person, but excluding a public body

When a person requests information in terms of this Act, it must be provided if:

a) the information is requested to exercise or protect a right
b) the person follows the correct procedure as prescribed by the Act
c) access to that information cannot be denied on any of the grounds of refusal as stated in the Act

The deadline for the submission and publication of the PAIA Manual for public and private bodies was 31 December 2011. However, for certain private bodies in certain economic sectors, this has been extended until 31 December 2015.  These exceptions are based on:

  • the economic sector in which the private body operates its business
  • the total number of employees being less than 50
  • the turnover of the private body being less than a certain amount per economic sector

This extension does  not otherwise impact on the enforcement of this Act, and the rest of the requirements of the Act are currently enforced.

The penalty for non-compliance is two years imprisonment or the possible option of fines.

This article is a general information sheet and should not be used or relied on 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.