According to the Practical Vat Loose Leaf
, SARS auditors will check the following…
11 general checks the Vat auditors carry out when they audit your business
The general checks in a Vat audit include:
· Individual totals as reflected on the VAT201 return compared to the general ledger and the summary.
· The Vat control account's reviewed to assess possible risks and the effectiveness of the accounting system used.
· The auditors will determine if the Vat penalties/interest were added back, i.e. not claimed as a tax deduction.
· A selection of tax invoices will be scrutinised to ensure their validity.
· The auditors will ensure the completeness of outputs and also check debtors.
· The exact classification of trade (exact type of enterprise) will be checked.
· Record of previous audits and results thereof will be reviewed.
· The type of supplies made (taxable, exempt, zero-rated) and the proportions thereof will be checked.
· The history of refunds claimed will be looked at (whether or not you submit returns and payments regularly).
· The value of assets and liabilities at the time of registration will be ascertained and questioned.
· Capital assets acquired will also be of interest to the auditors (VAT201 returns).
SARS has a habit of reconciling the turnover, as reflected on the Vat returns the company has submitted, with the turnover reflected in the Annual Financial Statements of the business.
If the financial statement figure's greater, it's indicative of sales not being declared for Vat purposes.
That's why it's very important your business checks this before signing the Annual Financial Statements –you must be able to explain any differences there may be. This is why it's so important to reflect all turnover items on the Vat returns, such as the exempt and zero-rated sales, and not just the taxable sales.
Until next time,
Managing Editor, Practical Vat Loose Leaf Service