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Do these six things to minimise your chances of a SARS audit

by , 17 July 2014
Your business isn't immune to a SARS audit.

SARS has the power to audit you at any time, without notice.

The taxman will audit your business if it feels it needs more information or if it thinks you're withholding something.

While you can't avoid SARS audits completely, there are six things you can do to minimise your chances. Read on to find out what they are...

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Before we take a look at how to minimise your chances of an audit, let's find out about factors that increase your risk of an audit

There're a number of factors that increase your risk of a SARS audit.

To spot these factors, SARS will compare the information you submitted.

For example, SARS will make a comparison between your annual financial statements, Vat returns and tax returns. It'll also compare other businesses in your sector to spot any risks.

According to the Practical Tax Loose Leaf Service, when SARS does its comparisons, it looks for any large changes in ratios that can be measured in the annual financial statements, such as gross and net profit margins, revenue, financing options and connected parties.

If, for example, SARS finds your company's profit margin has dropped by 50% in one year, it'll think you're skimming cash off your top-line to reduce gross profit and pay less tax. As a result, it'll audit you.

Now let's take a look at how you can minimise your chances of a SARS audit.
 

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Doing these six things will minimise your chances of a SARS audit

  1. Keep a good financial/credit record;
  2. Don't miss any due dates;
  3. Meet all your obligations in terms of income tax, PAYE, Vat, etc;
  4. Disclose your income correctly on your annual tax return;
  5. Stay up to date with tax legislation; and
  6. Ensure you issue valid tax invoices.

The bottom line: While you can't avoid a SARS audit completely, you can reduce your chances by doing the six things we've outlined.

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