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Revealed: The six-step Vat audit process

by , 13 September 2013
If SARS believes something on your Vat returns isn't right, your company could face an audit. With the Tax Admin Act in effect, the audit process has become more stringent and you'll face stronger penalties than ever before. Here's how to be 100% prepared and know what to expect...

You can't get away with 'feigning ignorance' any longer.

'If SARS does audit you and a single item in your records doesn't match up to what you've claimed in your Vat return or if you don't have a record of the claim, you'll end up being penalised, audited more often, or, at the worst, going to court,' warns the Practical Vat Loose Leaf Service.

But you can avoid all of this with thorough preparation. Remember, you have rights too.

Follow these six steps to prepare for a Vat audit

Step #1: SARS must make an appointment to meet with you. SARS official must produce an ID card to prove he's a SARS employee.

In terms of South Africa's Constitution, you have rights. SARS is an administrative body. Consequently, it must act within the Administrative Law of South Africa. One of your rights, according to this law, is the right to written notice of the intentions of SARS, says the Practical Vat Loose Leaf Service.

If SARS wants to issue an assessment against you, you have the right to demand written reasons as to why the assessment will be raised – before it's raised!

The fairer procedure is for SARS to send you a 'letter of engagement', where it tells you what exactly it wants to audit.

So demand one of these and tell SARS they must set out exactly what they want to come and look at.

Remember, the Vat law merely requires you to keep records available for inspection.

It doesn't give SARS the authority to order you around.

Step #2: When the appointment is made, determine the exact tax period to be audited. Don't accept vague answers. This'll ensure you prepare only the relevant documents.

Step #3: Prepare your documents. The type of documents will depend on whether SARS is auditing output or input tax, or both. It should tell you exactly which documents to prepare and how to collate them for the audit.

Keep in mind that SARS will definitely want to see your invoices – both sales and purchases. Also, have an explanation ready of how you arrived at the figures you filled in on your Vat return.

Almost 20% of tax invoices don't pass SARS' scrutiny. If you're not sure where to start, it's a good idea to have your ten 'biggest' invoices available to check. If they're for over R3 000, check that the buyer's Vat number is clear.

Step #4: When the audit team arrives, get them settled and comfortable and ensure there' are no interruptions. Take them to a quiet room, free of distractions like TV screens and ringing phones.

Step #5: Co-operate! Don't try to obstruct SARS in any way. Remember, they're only doing their jobs.

Step #6: Tell SARS to put any queries in writing and you'll respond in writing accordingly. This prevents misunderstandings and ensures a legal audit trail exists.

What happens after a Vat audit?

After the audit, SARS will send you a 'letter of findings'. You must address any issues raised by SARS within 21 working days.

Well there you have it. Preparation is everything. With this six step Vat audit process, you'll never be caught off guard.

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