Case law: SARS raises an assessment of R291 million against van der Merwe
Gary van der Merwe (v d Merwe) was involved in a company that bought a helicopter - ZS-HTN from a non-vendor. The amount was huge! And v d Merwe's company claimed a notional input tax deduction on this purchase price.
And we all know one of the requirements for claiming the notional input tax deductions is the purchaser must've paid for the second-hand goods. So v d Merwe issued shares to the seller as payment and SARS paid out an amount rumoured to be about R100 million.
But after some time, the helicopter crashed with no insurance at all. Here's what happened when SARS tried to recover the money...
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Do you know how to claim notional input tax?
Notional input tax can be confusing. And if you don't claim, you'll lose out on your input tax saving. But if you do claim without the required documents, SARS will slap you with nasty fines and penalties.
To make sure you're compliant with all of SARS' VAT rules, I recommend the Practical VAT Loose Leaf. It will give you all the information you need to ensure you meet not just your notional input tax obligations but all your VAT obligations too.
What happened to helicopter ZS – HTN?
While carrying out a fire fighting task with Working on Fire in Cape Town, the ZS - HTN engine lost power. The helicopter crashed, burnt and was a total loss - with no insurance.
This crash was well covered in the press and it drew the attention of SARS. So some months later, SARS realised they'd overpaid input tax on this helicopter.
They tried to recover the money and raised assessments totalling R291 million on van der Merwe and his company. This amount is the original R100 million SARS paid out in notional input tax, plus penalties and interest.
SARS arrested v d Merwe, and got search warrants to seize all sorts of records. When v d Merwe made bail he challenged the validity of the search warrants SARS used.
Read on to find out what happened next…
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The High Court finds in favour of v d Merwe
The Cape High Court and the Supreme Court of Appeal found in v d Merwe's favour in September 2010. SARS can use search warrants to seize specific documents but not for a fishing expedition!
Things went quiet for a while but suddenly, Candice van der Merwe - v d Merwe's daughter and well-known swimwear model, received a Range Rover, an Audi A8 sports car and US$15.3 million (about R180 million).
The banks, in terms of the money-laundering legislation, had to report this unusually large deposit to the South African Reserve Bank. As soon as SARS became aware of this money and the cars, they obtained a preservation order in terms of section 163 of the Tax Administration Act.
But Candice v d Merwe claimed these were gifts from a wealthy Arab admirer she met in the Seychelles while modelling there. She opposed her assets being taken away from her and took SARS to the High Court, the Supreme Court of Appeal and the Constitutional Court. They all found against her…
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Can't afford to pay your VAT to SARS this month? Here's a Tax Admin Act lifeline
I've just finished reviewing the upcoming issue of the Practical VAT Loose Leaf Service. We're sending it to the printer this week.
In it, we give the five steps you need to take when you can't afford to pay SARS. Follow them all the way through and you won't have to face unnecessary fines and penalties.
If you want to receive your copy, add your name to the list before midnight tonight 10 August 2016 here…
Gary v d Merwe lodges an objection against SARS' assessments
So what happens next? Gary v d Merwe and his companies have lodged objection and appeal against the assessments totalling R291 million. If they lose the appeal, SARS will simply attach the assets of about R190 million they now hold under the preservation order.
We should hear about the outcome in the next few months and when we do, we'll be the first to let you know…
In the meantime… Has SARS raised an assessment against you?
While it may not be as much as v d Merwe's, even if you don't agree with it, you must pay the amount due within 21 days. Unless you apply for a payment suspension. In the latest edition of the Practical VAT loose Leaf Service, I tell you how to apply for a payment suspension correctly and get the best chance of success…
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