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SAICA's hoping to ease financial pressure if you're under business rescue

by , 06 February 2013
If your business is under business rescue, you'll be relieved not to be facing liquidation. But that doesn't mean all the financial pressure is off. You're still obliged to meet the requirements of the Vat Act by accounting for input and output tax. Here's how SAICA's hoping to change the picture for you before this year's budget speech...

The recent fall in business liquidations is an indicator of the benefit of business rescue benefit, says lawyer Adam Harris of Bowman Gilfillan on the LegalBriefToday website.
 
After all,business rescue could be indirectly responsible for the 71% drop in local year-on-year liquidation figures in 2011, writes the Tax Bulletin.
 
But it's not all plain sailing.
 
If your company's under business rescue, you might escape liquidation but there's still a lot of financial pressure.
 
It's likely that you still have many debts owing to your suppliers going backmore than 12 months. 
 
That's why, with the 2013 budget speech fast approaching, the South African Institute of Chartered Accountants (SAICA) is calling for Finance Minister Pravin Gordhan to review provisions related to the Vat Act.
 
Here's what SAICA's suggesting to help ease the financial pressure while your business is under business rescue

If you haven't paid the full amount for a previously claimed input tax deduction within 12 months, you need to account for output tax for the amount still outstanding.
 
Having accounted for this output tax, you can claim an input tax deduction from SARS, equal to the tax fraction of the amount subsequently repaid.
 
But being obliged to account for output tax on outstanding amounts may result in 'the failure of any otherwise viable business rescue attempt,' says Piet Nel, SAICA's Project Director: Tax.
 
So if your business has already instituted business rescue proceedings, 'these payments should only come into effect once the business rescue proceedings have failed and the company is placed in liquidation,'Nel adds.
 
With just three weeks to go until this year's budget speech, let's hope this suggestion is taken to heart to help ease your business' financial pressures!

For more information on business rescue click here...

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