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Personal liability: SARS must take these four steps before coming after you

by , 10 February 2014
Section 11.3.3 of the Tax Administration Act (TAA) gives SARS power to take money from your bank account to settle another person's tax debt. But, there are four steps it must take before it does this...


How to make yourself invisible to SARS
Key to reducing how much tax you pay is staying off SARS' radar.
But SARS plans to double the 72,926 audits it managed this year. It's added 100s of new tax collectors and auditors to its payroll and each one has his own collection targets to meet. This means two things:
  1. Your chances of an audit this year has just doubled, and
  2. So has your chance of paying more tax.

Don't understand what we've said above? An example of this is:

Let's say you submit a tax return for a client and you indicate that you're a representative person for the return, but your client hasn't paid his tax liability. This means SARS can come after you to collect the tax debt.

But it must follow these four steps…


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Four steps SARS must take before making you liable for someone else's tax debt

Step #1: The taxman will always start with the person or company charged with the primary tax liability to recover the funds from them.

It'll request payment within a specific period. The tax payer can then arrange payment options with SARS. For example, the person may be allowed to pay off the debt over a fixed term.
Step #2: If SARS isn't able to recover funds from the primary source then it'll look if there's a 3rd person to be held personally liable for the outstanding tax debt. People who can be held liable for someone else's tax debt include:

  • A representative person
  • A withholding agent
  • Shareholder of a company that is being liquidated or dissolved
  • A Person appointed to deduct the tax debt but did not do this.

Step #3: It is at this stage that you'll face the music. SARS will contact you and tell you that it's holding you personally liable for tax debt.

They will send you a letter and then issue an assessment of the tax debt. This will have the same criteria of a normal tax assessment.

Step #4: If you don't agree with the assessment, object.

The Practical Tax Loose Leaf Service warns that SARS can go straight to your financial institution (i.e. Bank or retirement administrators) and request it to deduct the tax liability.

But, 'they must send you a final demand for outstanding debt first. On the final demand, a period is given when to settle the debt -usually within 10 days.'

Now that you know the steps SARS must take before making you liable for someone else's tax debt, check out this article. It has six good business practices you can use to minimise your risk of personal liability.

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