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VAT Case Law: Don't just hope for the best if you can't pay your VAT liabilities

by , 08 January 2016
Some businesses just don't have money to pay their VAT liabilities. But if you can't, you mustn't just think that nothing will happen to you if you don't.

Look at the following VAT case and learn a thing or two in order to avoid penalties, interest and jail time...

VAT case law: SARS vs Fastmould Specialists Western Cape High Court 28 July 2011

What were the facts of the 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 by June 2010.

By that time, many 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. SARS too judgment against Fastmould in terms of Section 40 of the VAT Act.

Fastmould disputed this, stating that SARS hadn't raised an assessment before making a judgment.

Keep reading to find out what happened next…

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.
They either:
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
What happened next?

Well, the Court dismissed Fastmould's dispute, arguing that the VAT returns which Fastmould submitted were, in essence, VAT returns. This is
because SARS only issues assessments when they're dissatisfied with VAT returns. It's also only really necessary to issue assessments for penalties and assessments, which accrue automatically in terms of the Vat Act and the Tax Administration Act.

Overall, the Court dismissed Fastmould's appeal and objection, and so SARS' judgment in terms of Section 40 of the VAT Act remained in place.

What can you learn from this case?

If you're a VAT Vendor, you collect tax for the state. You must collect VAT SARS' behalf and then pay it over as soon as it's due.

TIP: Stay ahead of your VAT payments to SARS. When you're in good standing with SARS, they'll be more willing to give you payment extensions.

Remember that if you don't pay on time or you declare incorrect input and output tax, there are severe consequences! Hundreds of VAT vendors are already paying the price in prison time, so avoid being one of them.
*Do you want to learn more great VAT advice to help you and your business avoid unnecessary penalties? Then subscribe to the Practical VAT Loose Leaf Service today. 

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