My friend Jody was utterly surprised when Fred the SARS auditor reversed the input tax claim on her six new company laptops. And as if to add insult to injury, he slammed her with penalties! But, she had all the documentary proof. And everyone knows SARS will allow input tax deductions on company laptops!
So why did SARS deny this?
You see, Jody submitted her input tax claim, which included the company laptops she bought for R20 000 each. That's a pretty penny of R16 800 input tax! So SARS sent Fred to conduct an audit. He agreed that all her documents were in order. But then he asked an employee one simple question...
As the employee answered, Jody says 'I could see Fred's eyes grow to the size of tennis balls!'
Fred told Jody her the company would face serious consequences. He raised an assessment with understatement penalties.
When Jody told me her story, I knew full well her employee had said the wrong thing to the auditor.
Read on to discover what never to say to say to a SARS auditor and how to avoid triggering a Vat audit...
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Don't the words 'Vat audit' send shivers down your spine?
You have to give SARS answers, but you don't have to give it verbal answers!
Once you get over the shock, you've got to wait for that dreaded day to arrive!
The unwanted visitors arrive. You gear up to spend hours sitting with the auditors going through your documents with a fine tooth comb.
But then, only 20 minutes into the audit, the team finds a mistake you made two years ago.
And because you don't know what to expect, you start doubting whether or not all your Vat papers are compliant...
I don't need to tell you, it's downright nerve-wracking!
But I will tell you how to put those fears to bed today!
Fred, the SARS auditor, asked Jody's employee what happened to the old laptops? "Oh, the boss gave them to us" was the answer!
The employee opened a new can of worms! And the problem is, as soon as you give a laptop to employees at a cost less than the value of the laptop, it becomes a fringe benefit!You must declare the output tax on this and pay it over to SARS.
So, Jody should've worked out the output tax by applying the current value of old laptops to the 14/114 tax fraction.
The value of an old laptop was R6 000 x 14/144 = R583.33. That means Jody should've declared and paid R583.33 output tax per laptop she gave away.
You should learn a very important lesson from this case.
You have to give answers to SARS' questions. But your answers mustn't be verbal. If SARS asks you for information, tell it to put any queries in writing! And you should respond in writing accordingly. Instruct your staff not to give verbal answers either, and have only one employee working as your company's representative.
This prevents misunderstandings and ensures a legal audit trail exists. If not, and SARS raises an assessment, you have no legal grounds to stand on! So keep documentary proof!
Read on to discover the red flags SARS looks out for when selecting Vat vendors for a Vat audit so you don't trigger one…
SARS has put a few surprises in the new VAT return… And they could cost you your refund!
Seven red flags SARS looks for – they could trigger a Vat audit!
Something as simple as leaving a space instead of putting a zero in column 1A of the new VAT return could cost you your refund!
Are you 100% sure you've covered all
Find out how you can avoid falling into the traps today!
SARS computer systems flag VAT201 returns that it identifies with these items:
Your undesirable behavior as a Vat vendore.g.Do you submit and pay your Vat on time? 40% of Vat vendors submit their returns late, and they're marked for audit!
The answer you put on your Vat return as to the type of business you're conducting. E.g. Do you render both exempt and taxable supplies? Or do you make regular exports and charge Vat at the zero rate?
Does your turnover shown in your income tax return correspond with that shown on your Vat returns.
Major differences or variances between your output and/or input tax for certain periods, or the purchase of capital goods costing more than R7 000 per item shown as ordinary purchases, and not purchases of capital goods.
Large and/or regular refunds claimed.
If you don't fill in the zero-rated or exempt supply blocks on the Vat return. It will then look like you buy more stock than you sell.
If you insert amounts on the Vat return into blocks you don't normally use.
SARS sees the above as risk factors! So make sure you submit your returns and pay your output tax on time. And keep documentary proof to prove your claim to SARS so you avoid triggering a Vat audit.
At the Vat Masterclass 2015, Dee Bezuidenhout is conducting a mock Vat audit. As an ex-SARS employee she'll show you the pitfalls to avoid and what your rights are in an audit, so SARS doesn't take you to the cleaners. Book your seat now!