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How ignoring one letter cost Mrs Brown R339 750 last month

by , 23 July 2015
A certain subscriber, let's call her Mrs Brown, submitted her Vat return via eFiling as she always does. But because of the recent 'end of season' sale she had, her calculations showed a higher than usual input tax claim of R220 010 and R113 250 for output tax. So the Vat return resulted in a Vat refund of R106 760 to Mrs Brown.

But, SARS sent her the dreaded Vat pop-up letter. As she was busy, she missed the letter and didn't attend to it.

SARS proceeded to assess Mrs Brown's company. It reversed her input tax - essentially making it nil. This now resulted in the R113 250 output tax being payable to SARS.

Two months later, SARS didn't get any response or money from Mrs Brown. So it sent a stop order to her business bank account for the money she owed, plus a 200% penalty.

The total bill... a whopping R339 750!

You see, Mrs Brown's little error here cost her three times the Vat!

Read on to find out how you can avoid making the same mistake...

If there's a significant difference on your Vat refund, SARS will send you a verification letter

SARS' computer system automatically flags your Vat return if it differs significantly to your previous returns. For example, if your output tax, or input tax is much higher or lower than that of the previous tax periods.
Then it sends you a Review of VAT201 Declaration Letter when it identifies your VAT201 return as a risk.
So don't be surprised if you get a letter when your input tax, like Mrs Brown's is more than usual.
The biggest mistake you can make here, is ignore it! You see SARS sees your silence as agreement.
Read on to find out how you should respond when you receive this verification letter.

**********SARS issues TWO MILLION Vat review letters a year**********

That's the letter that pops up immediately after your submit your Vat returns. The same letter that has seen people around the country wake up to thinned out bank balances.

Now get this: There are only 700 000 vendors registered with SARS…

You do the math.

Every vendor should receive this letter at least once a year.

Here's how to protect your bank account before you do…


How to respond to the Review of VAT201 Declaration Letter
When SARS sends you the letter, it wants you to double check the figures you've filled in on your Vat return and check them against your supporting documents to make sure you haven't made any mistakes. 
If you check your documents and figures and they're all correct, send SARS a letter to say so!
But if you've made a mistake, send SARS a request for correction. Tell SARS what the mistake was and ask it to correct the error and waive any penalties.
Make sure you reply within 21 business days.  Or like Mrs Brown, SARS will simply tax the output tax you declared and disallow all the input tax you claimed.
And yes, SARS will just grab the money out of your bank account!
P.S. Declaring zero-rated supplies on your Vat return will automatically trigger this letter and a Vat audit. Here's how to make sure you can satisfy SARS' stringent requirements when it comes to zero-rated supplies.

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