Vat Matters: Pass the Prozac

One of our subscribers contacted me in a panic. On Monday, she received a demand from SARS to pay R375,000 within 48 hours!

She said - “It can be. We have paid all our taxes!”

SARS replied back - “We received all your VAT returns but, for the last three years, no payments have been received."

In response to SARS’ comment - “Can't be," said the owner of the business - I personally made internet payments to SARS."
 
First stop – Visit the bank!
A quick visit to the bank brought on another panic attack - an employee who had left the business more than a year ago had changed the "beneficiary" of the payments from SARS to herself. So even after she left, the owner merrily kept making EFT transfers to her former employee and it might have gone on forever, if SARS had not started its annual drive to collect debts!
 
Interest and Penalties – here we come
The former employee had helped herself to more than R200,000 in Vat payments intended for SARS. To this unpaid amount, interest and penalties had been added, and SARS quite legally wants its R375,000 before the sun sets tomorrow!
 
This is not a unique case
Is this is an isolated incident - not on your Nellie, I have a number of other subscribers who have suffered similar losses, the biggest totalling R8 million! SARS says that it’s not their problem. You just have to pay again - with penalties and interest. They might, however, consider a reduction of the penalties if you make representations.
 
What can you do to prevent this happening to your business? Follow these 3 steps:

1. Get a statement of account from SARS for all taxes every six months and check it yourself - don't rely on your bookkeeper saying "Everything is in order."
2. Visit your bank and check that tax payments are going to SARS.
3. Another way of checking that everything is in order with SARS is to ask for a "certificate of good standing" tax clearance certificate from SARS. This can be done on E-Filing and it will tell you if everything is not in order. If it say that returns are outstanding and you know that the taxes relating to those returns have been paid, you must also suspect fraud - no debit raised on the return - so where have the returns and money gone?

SARS has lost some R83 million in the last year with internet and cheque frauds and have recovered very little of the money. These frauds have involved SARS employees. So posting them a cheque or dropping it in the SARS mailboxes is like playing Russian Roulette - using E-Filing or personally paying the cheque into a SARS banking account at ABSA, FNB, Nedbank or Standard Bank is a much better idea.

Remember the following payment deadlines:

Use this chart to make sure you never miss a return submission or payment deadline, no matter what payment method you use.

Postal and internal fraud is such a big problem at SARS that they no longer accept cheques for more than R100,000 at their offices or through the post. On top of this, taxpayers are often caught with phishing scams. If you get an SMS or email telling you of an unexpected tax refund, don't give you banking details - contact the SARS fraud line immediately.

Until next month

Peter Franck
Editor-in-Chief – Practical Vat Loose Leaf

P.S. Deregistering for Vat could be your business’ death sentence

Exiting the Vat net will mean your input tax claims are a thing of the past, your cost base will increase and your profit margins will get lower.  Don’t make the wrong choice!

There’s only way of making sure all your Vat decisions are correct…find out more here.