Why it's not an excuse to say 'I can't pay VAT this month'
So what happens if you can't pay your VAT this month?
Funnily enough, we've just received a question from one of our readers, Mark. He didn't submit his VAT return and in turn couldn't pay his VAT to SARS.
Let's have a look at what Peter Frank, Editor in Chief of the Practical VAT Loose Leaf, had to say...
How to get your VAT documentation right – first time, every time
Did you know...that in the vast majority of cases SARS has issues NOT with your interpretation of the Act, or with fancy avoidance schemes, or even with complicated transactions, but with your documentation.
This is where the most disputes, investigations and all-out battles with the assessors arise – and the crazy thing is, it's all so avoidable.
You must get your documentation right, first time, every time.
Here's the only resource that will show you how with practical tips and explanations, checklists and actual examples of invoices and returns.
If you do what Mark did, you'll not only end up paying VAT, but penalties and interest on top of it
So here's what Mark wrote into the VAT helpdesk asking Peter… 'I haven't been submitting my company's VAT returns (the VAT201) because we just don't have the money to pay SARS the VAT".
Peter's response to this: Having no money to pay SARS isn't a valid excuse. It's your legal obligation to pay SARS, but there is a way around this, which I'll explain later.
But here's the thing, SARS doesn't ask for the VAT forms or for any additional information. So I feel safe, thinking SARS won't pick up on the fact that we haven't paid our VAT bill.
Peter's response to this: Never feel safe. SARS will pick up that you've been paying your VAT before and didn't this time around.
All I want to know is, what if SARS wakes up one day, or decides to audit us, will we be liable for the outstanding money or will SARS let it slide because we just don't have any cash?
Peter's response to this: SARS will never let it slide. They want their money and will do what they need to, to get it. But I have a lifeline for you.
Here's the lifeline Peter gave him…
*********** Hot off the press ************
What keeps 93% of South African accountants awake at night?
Invoices! Do these 4 situations concern you too?
We will put all your invoicing nightmares to bed. Click here
You are issuing an invoice. You must pay VAT but you're not sure whether or not your client is going to pay the invoice… Do you have to pay the VAT with your own money? Maybe you would like to find out how to avoid paying VAT for invoices until they've been paid by your clients and how to comply with the VAT regulations at the same time?
Your client says the invoice he received from you has errors, so he's not going to pay it until you have issued a correct invoice. Do you know how to argue in order to persuade him that he is not right?
The tax office called one of your invoices into question while auditing your client. What will you do when the tax office approaches you – as an issuer – and tries to make you responsible for that?
It turns out that your client has not declared VAT properly. Or even worse – he/she turns out to be unreliable: it's a fictitious company, a tax cheater or simply a mail-box company. Can you deduct VAT from this invoice? How do you handle this if SARS comes calling?
Just because SARS doesn't ask you for your VAT return, doesn't mean you shouldn't pay
In terms of the VAT Act, Mark is obliged to submit his VAT return, within the time prescribed by the Act.
The VAT201 shows you the VAT you have charged on your supplies and the amounts you can deduct as input tax. The difference in these amounts show if you have to pay SARS extra each month or you should get a refund from SARS.
So, Mark wouldn't actually know if he has to pay SARS or not until he submits his VAT return. If he submits his return, and sees he owes SARS money, he can ask SARS to let him off the hook.
All he has to do is ask for a payment suspension. The Practical VAT Loose Leaf gives you all the steps you need to take to get a payment suspension if you're ever faced with the same situation. It's best to be open and upfront with SARS. They are more likely to help you out, than if you hide it and they found out about it later on.
Note: 5 of 1 vote