Dear fellow taxpayer,

Do your clients only pay you 60 or 90 days after you invoice them? Unfortunately, their late payment doesn’t stop the income accruing to your business or halt your tax and Vat liabilities triggered by the invoice.

One way of preventing this cash-flow killer (as far as Vat is concerned) is to change from the invoice basis, to the payments basis of accounting for Vat.

On the payments basis, you only account for Vat on actual payments made and received, not on payments accrued!

The following Vat vendors can switch to the payments basis:

• natural persons (or partnerships consisting only of natural persons);
• whose total taxable supplies at the end of a tax period have not exceeded R2.5 million in the previous 12 months; and
• whose total taxable supplies aren’t likely to exceed R2.5 million in the next 12 months.

Remember: You must apply in writing to SARS for permission to use the payments basis.

Until next time.
 
Regards
 
Nothando Hlatshwayo

Managing Editor
Practical Vat and Tax Handbooks