A Vat audit is usually triggered if there's a discrepancy between your asset base and declared income. Putting a simple zero in the wrong place on your Vat return is all it takes to trigger the Vat audit process that could cost your business thousands, says FSP Business.
But you can reduce this risk if follow these simple tips.
Use these seven tips to reduce your risk of a Vat audit
Tip #1: Ensure the turnover figure on your financial statements matches the figure on your return
According to the Practical Vat Handbook, one of the most common mistakes vendors make is to have conflicting turnover figures in their annual financial statements and their Vat returns. If there are good reasons for the difference, make sure you're able to answer a query from SARS in this regard.
Tip #2: Don't claim input tax on exempt supplies
If you make exempt supplies, such as letting homes or supplying staff housing, make sure you reflect the supplies as exempt in your Vat return. Be careful not to claim input tax relating to the exempt supplies.
SARS regards vendors making exempt supplies as a risk. The failure to show zero-rated and exempt turnover will attract an audit.
Tip #3: Reflect big capital purchases in Block 14 of your VAT201 return
If you make a big capital purchase, for example, fixed property, expensive machinery or even a delivery vehicle, make sure you show it in Block 14 of the VAT201 return. If your non-capital input tax suddenly shoots up, you'll definitely trigger an audit.
Tip #4: Investigate unusual increases in turnover
If you receive regular amounts of income, such as rent, your turnover shouldn't vary much from tax period to tax period. Check you haven't made any mistakes that could cause an unusual 'spike' in turnover. SARS pays particular attention to such increases.
Tip #5: Never claim your input tax prematurely
Be careful not to claim input tax before you're entitled to it. For example, if you buy fixed property, you can only claim the input tax on the amount actually paid for the property.
Tip #6: Never attempt to claim input tax on these expenses
Don't claim input tax on client lunches, staff teas, meals and parties, or even car hire. SARS is always on the lookout for these claims and will disallow them with penalties and interest. It may even slap you with 200% additional tax if you've previously been told not to claim the Vat on these expenses.
Tip #7: Never try to deduct penalties or interest paid to SARS
Don't claim interest, penalties or additional tax paid to SARS as an income tax deduction in your financial statements. These aren't deductible and will only result in more penalties being imposed.
Using these tips will ensure your Vat affairs are in order. As a result you'll avoid triggering a SARS audit.