Can you really afford not to be 100% sure about every input tax claim you submit?
Most VAT vendors make one of two big mistakes when claiming their input tax.
1. Don't know about certain input tax deductions which SARS allows, and then lose out on important cash flow savings for the business; or
2. Claim when they shouldn't and face SARS penalties and assessments!
Don't make the same mistake. Here's how to be 100% sure about all your input tax claims
SARS vs Fastmould Specialists Western Cape High Court 28 July 2011
In this case, Fastmould went into arrears with its PAYE and VAT liabilities.
In September of 2009, it paid out around R140 000 of its arrear debt. But it still owed around R1.6 million to SARS by June 2010.
By that time,
VAT returns were outstanding, and so SARS didn't accept Fastmould's offer to pay off the debt in instalments and forced Fastmould to submit all VAT returns.
Fastmould disputed this, stating that SARS hadn't raised an assessment before making a judgment.
But the Court dismissed Fastmould's appeal and objection, and SARS' judgement remained in place.
So how can you prevent this from happening to you?
It's simple, you need to be as honest with SARS as possible in trying to pay your VAT liabilities. Keep them updated of your situation, and they'll be more understanding than with Fastmould who kept quiet and hoped for the best.
Six steps if you can't afford to pay SARS on time
STEP#1: Don't forget your VAT returns
Even if you know you can't pay, you must still submit your VAT return(s).
If you don't submit your returns on time, you're guilty of a serious offence, which can amount to a R80 000 fine or two years in jail.
STEP#2: Visit your SARS office
Go to the SARS client services centre in the area where you're registered for VAT and tell them exactly what your situation is.
STEP#3: Give a detailed explanation of your situation
Clearly lay out your circumstances in writing. Here you'll explain why you can't pay the VAT, after which you'll make a proposal as to how you'll be able to settle the particular amount.
Keep reading to see the last three steps…
Filling in the wrong block on your VAT return, will trigger the 'Dear Vendor' letter
SARS tell you your VAT201 declaration has been identified for verification. It wants you to review your VAT201 and submit corrections.
DON'T just upload all your documents!
Or you'll give SARS permission to grab money from your business bank account!
Here's what you should do…
The six steps continued…
STEP#4: Give SARS your up-to-date financials
Put together a statement of your income and expenditure, as well as an up-to-date statement of your assets and liabilities.
STEP#5: Get all your paperwork in order
Make a copy of your latest bank statement and take it with you to SARS.
STEP#6: Consult with SARS
When you do meet with SARS, explain your situation both in writing, as well as verbally.
Discuss your proposal for settling the amount in question with a SARS official.
Remember that SARS will allow you to settle your VAT account over a period of time. This period depends, of course, on your circumstances.
But also keep in mind that SARS won't allow you to settle your VAT account over a period of time if you've ever been found guilty of evasion.
*To learn much more on dealing with overdue VAT account payments, simply page over to Chapter O 04
in your Practical VAT Loose Leaf Service
handbook, or click here
to order your copy today.