HomeHome SearchSearch MenuMenu Our productsOur products

Here are two case studies that illustrate how you should deal with SARS

by , 04 June 2015
Today, we're sharing two study cases to help you find better ways of dealing with SARS. Plus we've included the three elements you should include in any letters you send to the taxman if SARS disapproves your input tax deduction.

Read on for more.



How to deal with paying Vat when your customer has extended payment terms?


Here's the question:

My business income has come down dramatically due to payment terms on a new customer. My company was registered for Vat on the 'Invoice Basis'. The problem I have now is due to the extended terms on my new customer. I haven't yet received the money which I now have to pay Vat on. What can I do, so I don't have this financial stress on me due to a low cash flow?

Keep in mind that if you're a sole trader or in a partnership, with a turnover of less than R2.5 million in a year, you can register for Vat on the payments basis. This means you can account for your Vat (and claim for it) as per actual payments received and made.

However, note that the payments basis is only for:

• Individuals and partnerships with turnovers of less than R2.5 million a year;
• Municipalities;
• Water boards; and/or
• Associations not for gain.

The invoice basis is for everyone else. And yes, everyone else suffers with cash flow to pay the Vat.

All I can suggest is that you attempt to issue your invoice only when you get the payment from the client.

There's good news too – in the 2015/2016 budget, SARS announced it's considering extending the payment basis to companies and trusts, and increasing the R2.5 million limit.

 *********** Recommended For You ***************

Getting your VAT refund from SARS just got harder…

A small administrative mistake is all it takes for SARS to have the right to withhold your refund.

Put a simple zero in the wrong place on the new VAT return could and you can forget about getting even a cent of your money back.

Make sure this never happens to you by filling in the new VAT return 100% correctly every, single time.

I'll show you how here.

 ***************************************

Now, let's look at the second case and see what can you do about your disapproved input tax deduction!

SARS disapproved my input tax deduction on debt I wrote off. What should I do so this doesn't happen again?

Here's the solution!

You can claim Vat on bad debts (Section 22 of the Vat Law). It just says that where you've issued a tax invoice, paid over the Vat to SARS, and the debt is irrecoverable, then you're allowed to claim the tax fraction of the debt back as input tax.

On what grounds did SARS disallow your deduction? If it's for no reason, then you can claim the Vat again in your next tax period, based on this info I've given you above. You know much better than SARS whether the debt is irrecoverable or not.

To do this, sure your letter to SARS contains these key elements to prove you've covered your bases:

1. You've written the debt off in your financial accounts;
2. You've stopped pursuing the debt, or handed it over to a lawyer or debt collector; and
3. Why you regard the debt as irrecoverable or not worth pursuing



Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>