Tax experts offer their top tips for small businesses

Picture: Motshwari Mofokeng, ANA.

Picture: Motshwari Mofokeng, ANA.

Published Jun 12, 2021

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By: Colin Timmis, Candice Mullins, Louis Fourie, Nicole Rousseau,

We’re approaching tax filing season, so it’s time for small business owners to get their information in order and ready to file. Everybody knows that filing taxes can be extremely time consuming.

Small businesses are already struggling, so it’s vital that they get tax filing right to avoid any penalties or nasty surprises. This means understanding how to stay compliant and also what special taxes may apply to them.

Over the past few years the SA Revenue Service (Sars) has worked hard to provide digital alternatives to filing in-branch, including eFiling and internet bank transfers.

The changes are helping to improve the process – Sars reported that the majority of payments (81.2%) received in 2019/20 were via eFiling; eFiling means SMEs can send in their returns, review their tax status and pay Sars online, for free at any time.

It’s also crucial that small businesses are aware of the tools and support available. At Xero, we've developed a new suite of cloud tools to enable SMEs to prepare, store and eFile VAT returns to Sars all in just a few clicks. These tools increase efficiency, reduce errors and admin – it’s never been easier or faster to eFile.

Here are their top tax tips to set SMEs off to a strong start this tax season:

Avoid nasty surprises

By Candice Mullins

There is no better sight than hindsight. Many businesses think that tax planning is only applicable to large corporates but they are wrong, it is critical in any small business and tax planning should be done with a reputable and experienced tax professional.

Having a 360° understanding of one’s tax risks enables small businesses the opportunity to understand the tax implications of day-to-day transactions. Be as tax efficient as possible, avoid any nasty surprises, and manage cash flow to cater for the taxes payable, thereby avoiding penalties, interest and other negative consequences and, finally, maintain a healthy relationship with our Revenue Service.

Get your tax-house in order – there’s nowhere to hide this year

By Louis Fourie

The days of taxpayers’ compliance status not-being fully tested by Sars are well and truly over. Sars’ Strategic Plan for 2020/21 to 2024/25 also spells it out clearly – there will be increased levels of compliance, higher detection of those who don't pay, and fines or penalties for those that don't comply.

Small businesses should be working with their accountant now to ensure a timely submission and to work out exactly what they need to be compliant this year. Sars is raising auto assessments for certain individual taxpayers, and you should speak with a registered tax practitioner about these to ensure that Sars is assessing you correctly as you may be losing out on valuable refunds.

There’s need for a close eye on all your details and documents. Make sure that your registered details are 100 percent correct with Sars, as incorrect details may lead to unnecessary penalties. Always promptly address any questions from Sars and use Xero to keep record of all your accounting transactions and supporting documents that they may request.

Automate processes and use the right technology

By Nicole Rousseau

Technology is key to taking the pain out of tax filing for small businesses and accountants. We’ve seen digital developments in recent months that are changing the game. From bank feeds that allow the automated flow of business transactions into accounting software, to being able to snap receipts and upload the information from anywhere.

Using a cloud accounting platform to manage your finances makes it easy to see your finances in real-time and collaborate with your accountant seamlessly throughout the year. This means that when you come to file, everything is ready and easy to view.

We’ve also been trailing Xero’s direct eFiling to Sars feature. New technology like this means that a manual process which used to have multiple steps is now quick and simple for small firms. I’d recommend that all business owners look at how tech tools can automate a lot of the heavy lifting for them.”

Colin Timmis is the country manager and professional accountant at Xero South Africa; Candice Mullins is the managing director of The Tax House; Louis Fourie is the managing director of BVSA; Nicole Rousseau, is the head of PKF Ignite.

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