How to avoid tax penalties
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 record- keeping. 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 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 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.