The Automotive Industry, Logistics and more
SARS has expanded its Tax Web - How can I protect my business and myself?
I am sure everyone has received a verification or audit letter from SARS in the past that was system generated, non-specific and requested everything you could possibly imagine without having regard to your specific circumstances.
Your defense would be that the information requested was not based on the facts in that matter. In essence, that forced SARS to ask for only the information they needed and nothing more. The reason for this vague and open-ended approach by SARS is that they have not clearly defined their audit objectives before sending an audit letter and therefor have no choice but to ask for all relevant material.
Recently the definition of “relevant material” was amended by only adding a few words.
Definition of: “relevant material” in the Tax Administration Act (TAA) to mean “any information, document or thing that in the opinion of SARS is foreseeably relevant for the administration of a tax Act…” (Our emphasis).
This puts the taxpayer in a very difficult position. What is relevant material? Well the answer is simple, SARS will tell you.
How does this affect you? If you are experiencing a verification or audit and you have not engaged with SARS correctly from the beginning you leave yourself exposed.
For example - SARS could ask you for the closing balance of your car’s kilometers even though you do not have a travel allowance. SARS need only deem it relevant material that may be foreseeably relevant in the future. What if there is information you just can’t supply because you just don’t have it? The same applies.
So down to brass tax
Real world implications include that you may lose your tax clearance certificate and assessments could be raised, as you did not comply with their requests. There is also a significant amount of your own resources that will be used and even if you win the argument, you are still out of pocket. In short, a SARS verification or audit is going to cost you money with no real benefit.
So is their hope?
Most certainly! Provided your tax adviser is up to speed and your e-filing profile is setup correctly this new provision may actually be quite helpful. Before allowing SARS access to your documentation and supplying information there are some basic steps that should be followed. The most important are those relating to the scope and limitations of the audit or verification.
Suggested process when dealing with a SARS verification or information request:
• Do not panic!
• Do not pay penalties and assessments before consulting with your tax practitioner,
• Do not engage with SARS or reply to request without consulting your tax practitioner, and
• Ensure that you follow due process and official procedures as required by the Income Tax Act and Tax Administration Act.
Ensure the following is in place:
• Appointment of an accredited tax practitioner,
• A properly constructed e-fling profile,
• Access to source documentation for all transaction types, and
• Early detection of risk areas can be performed through compliance reviews.
BCE Consulting was able to assist 100% of our clients to date with SARS verifications and audits. We ensure that you, the taxpayer are treated fairly and ensure that your rights are protected. You and your company will be in a better position with our assistance and have an 80% improved chance of successfully managing the risks associated with SARS audits and verifications with our help. Call us today and get empowered to handle SARS related matters with confidence and a higher probability of success.
Cartoon, property of Gary Larson