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Do this so SARS can't ring-fence your losses and prevent you from using them!

by , 29 August 2014
SARS' job is to collect as much tax as possible for all taxpayers. Because of this, it doesn't really want you to claim deductions. This means it may try to stop you from claiming your company's financial loss as a tax deduction by ring-fencing them.

You mustn't let it do this! You have a right to claim those losses as a tax deduction.

But how do you stand up to SARS and stop it from doing this?

It's easy if you follow this simple guide...

 

Here's what ring-fencing is

 
Ring-fencing means SARS doesn't allow you to offset the losses you made in one trade (such as in your hairdressing business) against another trade (such as your scrapbooking business). 
 
SARS can apply ring-fencing to natural persons such as any individual taxpayer and members of a partnership. 
 
Some examples of this are when:
 
Your taxable income for the year is low and SARS isn't confident your business will survive;
You had tax losses in three of the last five tax years; and
Your 'trade' is a suspect trade such as a hobby, like snowboarding. 
 
So how do you stop SARS from doing this?
 
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Here's how to ensure SARS doesn't ring-fence your losses and stop you claiming them as deductions

 
To ensure SARS doesn't ring-fence your losses, you must prove that your business it healthy and functional and you haven't made losses - tax or otherwise - in the last five years.
 
If you can prove that your business is functioning normally, SARS has no reason to ring-fence your losses.
 
If SARS does, you can challenge the decision. But be sure you have the documents to back it up.
 


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