Durban - Small business owners are advised to ensure that if their business tax returns are not up to date that now is the time to get those affairs in order.
Come December, the South African Revenue Service (SARS) will start imposing administrative penalties on companies that receive final demands to submit returns.
Unlike personal taxpayers, companies were not fined in the past for late income tax returns nor for failure to file submissions. However, SARS is now reportedly looking to hit some 300,000 registered companies with fines for failing to submit their income returns.
The exact penalties will depend on your assessed profits or losses and will range between R250 to R16 000 per month while non-compliance continues. That could rapidly add up to a hefty amount for a small business that fails to comply – especially if added to penalties for late payment of taxes.
Here are tips to ensure that you find yourself on the right side of the SARS laws:
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.
Appoint a qualified accountant and tax practitioner - If you are not an accountant, it is wise to ask a qualified professional to help you prepare and file your company income tax return (also known as the ITR14). It is a legal requirement for a limited company in South Africa to appoint an accountant or an accounting officer to sign off its accounts at the end of each financial year.
Stay ahead of deadlines for the 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 SARS.
Always make ample provision for the money you owe SARS for income tax - Many small businesses, especially those in their early stages, survive month-to-month. If you are heading for a cashflow crises, do not use money you owe SARS for 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.
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 gone dormant. Work with an accountant as soon as possible to establish what your tax liability could be, and then approach SARS without delay. If you communicate early and honestly, SARS may be more receptive to helping you structure a sensible repayment plan to clear your debt.
Stay abreast of the latest SARS news - The South African tax environment is constantly changing as SARS tightens policies and regulations. Visit the SARS website often to stay up to date with any new regulations and requirements, and keep an eye on the business press for tax news and advice.