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Why applying these good business practices will reduce your risk of personal liability

by , 28 August 2014
In terms of the Income Tax Act, a representative person can be held personally liable for someone else's tax debt. A representative person is anyone who's responsible for paying the tax liability of another person or company and is nominated at SARS as the representative person. For example:

• An accountant;
• Financial manager/director;
• Bookkeeper;
• Business owner; or
• Tax practitioner.

So as a business owner, SARS could hold you liable for a tax debt. Can you imagine having to fork out large sums of money for something you didn't do?

Luckily, you can minimise your risk of personal liability if you apply the following good business practices...

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Applying these good business practices will minimise your risk of personal liability

#1: Make sure you've got everything you need before you submit a return

For example, you must compare the current month's return with a prior month and follow up on variances or enquire why your company will be getting a refund when you normally always pay in.

In some cases, SARS can only hold a representative taxpayer liable if he's negligent or fraudulent in dealing with taxes. So make sure you're careful when you compile information and documentation, says the Practical Tax Loose Leaf Service

#2: If you know there was an error in previous returns by someone else, try correcting the error

Don't just keep quiet because you didn't make the error. If SARS proves you knew about it, it can hold you responsible because you were negligent.

You can register for the Voluntary Disclosure Program (VDP) and re-submit previous returns. SARS won't impose penalties and will charge you very little interest. This'll protect you from additional liability.

There you have it: The moral of the story here is you must be honest with your tax affairs and apply these good business practices. It's the only way to minimise your risk of personal liability.

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