January 2024 - Emma Pardoe CA (SA)

Provisional Tax: Are You Ready for the Crucial 29 February Deadline?

“Provisional tax is merely a mechanism to pay the normal income tax liability during the tax year… an advance payment of a taxpayer’s normal tax liability.” (SARS)

To provisional taxpayers, especially those who are liable for provisional tax in both their personal capacities and as business owners, it may well seem that there are endless provisional tax deadlines and payments to be made every year.

There are indeed numerous income tax provisional and final declarations and payments that overlap across tax years, which is certainly confusing, and yet non-compliance is met with some of the harshest penalties imposed by SARS, most notably in respect of the second provisional tax declaration and payment, due by the end of February for individuals, and for companies with a February financial year end.

In this article we find out who are provisional taxpayers, what they need to pay and when and how to avoid the penalties for non-compliance.

What is provisional tax?

Provisional tax is not a type of tax, but a cash flow mechanism to collect pre-payments of taxes that must be made in respect of individual provisional taxpayers’ and company taxpayers’ normal annual income tax prior to a final determination of the annual tax liability.
At least two amounts are paid in advance during the year of assessment, based on estimated taxable income for the year of assessment. A third optional payment can be made.

Why must provisional tax be paid?

Ensures government collects cash more evenly during the year and not just in bulk amounts following final tax assessments which are annual and usually in similar time periods e.g. end of December or February.
Spreads the payment of a taxpayer’s year’s income tax liability over two or even three provisional payments.
Prevents taxpayers facing large income tax liabilities that are only revealed at the end of the year of assessment when the annual personal income tax (PIT) return ITR12 or the annual corporate income tax (CIT) return ITR14 is filed.
The first, second and third provisional payments are credited against any tax owing after the final income tax return is filed, and any further tax liability will then become due.
Reduces the risk and amount of interest accruing between the time when a tax liability is determined and when it is paid.

Who must pay provisional tax?

Provisional tax is paid by individuals who earn income other than, or in addition to, a salary or traditional remuneration paid by an employer from which PAYE deductions are made – including those who earn income from conducting a business, such as members of CCs, sole proprietors and company owners.
Companies and trusts.
Any person notified by the Commissioner of SARS.
Exceptions and thresholds apply in every instance, so be sure to check with your accountant.

When is provisional tax due?

Below is an example of the provisional and final income tax due dates for:

The 2024 year of assessment (1/03/23-29/02/24) and
The 2025 year of assessment (1/03/24-28/02/25)

for a company with a February financial year (FY) end.

It shows how the due dates for different years of assessments overlap to create both seemingly endless provisional tax deadlines and much confusion.

The company provisional tax due dates shown in the table above are the same for individual provisional taxpayers, but individuals who are provisional taxpayers will be due to file their annual personal income tax (PIT) returns in January at the end of the tax season as announced by SARS.

How much are the provisional tax payments?

Individual provisional taxpayers

During every period, individual provisional taxpayers must submit an estimate of their total taxable income in the year of assessment, excluding any retirement fund lump sum or withdrawal benefit or any severance benefit. The taxpayer’s estimate must be informed by a reasonable calculation.
The taxable portion of the aggregate capital gain for the current year of assessment must be included.
The estimate may not be less than the ‘basic amount’ which is the taxpayer’s taxable income assessed for the preceding year of assessment, less any taxable capital gain; the taxable portion of a retirement fund lump sum or withdrawal benefit or severance benefit, and other amounts specified by SARS, unless SARS approves a lesser amount. SARS can still adjust an estimate upwards that is more than the basic amount but less than a reasonably calculated amount.
The calculations provided by SARS below show why professional assistance is optimal.

Source: SARS

Company provisional taxpayers

Company provisional taxpayers must submit a return of an estimate of the total taxable income for the year of assessment.
It cannot be less than the basic amount, which is the taxpayer’s taxable income assessed for the latest preceding year of assessment, less the amount of any taxable capital gain in that year of assessment.
The basic amount for all taxpayers must be increased by 8% if the estimate is made more than 18 months after the end of the latest preceding year of assessment.
The calculations provided by SARS below reveal why the assistance of your accountant is invaluable.

Source: SARS

Top tips

SARS can ask for the estimate to be justified and can increase the estimate if they are dissatisfied with the amount, and this is not subject to an objection or appeal.
SARS provides the following advice: ‘the calculation must be one which has been carefully considered and is thoughtful, earnest and sincere…” and the amount of the estimate must be determined “sensibly and by careful reasoning and judgment, in a mathematical manner, and using experience, common sense and all available information”.
Keep accurate records of all the calculations and source documents used.

How is provisional tax declared and paid?

A provisional return or IRP6 return must be submitted by all provisional taxpayers for the first and second periods.
Even if you or your company owes no tax, a ‘nil’ return showing taxable income is equal to zero must still be filed on time.
If an IRP6 is filed more than four months after the deadline, SARS considers a ‘nil’ return to have been submitted – unless the actual taxable income is really zero, this will result in penalties.

What are the penalties for non-compliance?

A 10% penalty will be levied on late payments, along with interest at the prescribed rate.
Harsh penalties for under-estimation are levied when the actual taxable income is more than the taxable income estimated on the second provisional tax return. The penalty amount depends on whether the actual taxable income is more or less than R1 million.
Where taxable income is more than R1 million – if the taxable income estimate for the second provisional tax payment is less than 80% of actual taxable income declared on the annual tax return, a 20% penalty will be levied on the difference between: the amount of tax payable on 80% of actual taxable income after taking into account rebates, and employees’ tax and provisional tax already paid.
Where taxable income is less than R1 million – if the taxable income estimate for the second provisional tax payment is less than 90% of actual taxable income, and is also less than the basic amount, a penalty is levied of 20% of the difference between: employees’ tax and provisional tax paid in the year of assessment, and the lesser of (a) the normal tax payable on 90% of actual taxable income (after deductible rebates) or (b) the normal tax payable for the year of assessment on the basic amount.
Interest at the prescribed rate (7.75% pa subject to change) will also be levied on the underpayment of provisional tax as a result of under estimation.

Rely on tax expertise

Provisional taxpayers, whether individuals or companies, should consider relying on the expertise of their accountant to assist them in preparing and/or reviewing their provisional tax and income tax returns prior to submission. Similarly, where penalties and interest have already been imposed and levied, taxpayers may need expert assistance to successfully make a request for the remission of such penalties and interest to SARS.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 30, 2024

Business / Financial

These Invoicing Tips Could Save Your Business

“Never take your eyes off the cash flow because it’s the lifeblood of business” (Sir Richard Branson, entrepreneur, investor, and author)

Cash is king, said one anonymous business genius. At the end of the day, it’s having money in the bank that keeps a company running smoothly. According to a recent study by Sibongiseni Selby Myeni at the Walden University, the majority of SA’s small to medium enterprises are destined for the scrap heap and the majority of these cases will be due to a lack of cash flow. In an era where more invoices are going unpaid, how can your invoicing process help to make sure you are one of the lucky ones?

Send the invoice immediately

The best time to send an invoice is when you and your relationship with a client is still fresh in everyone’s minds. Ask for the invoicing details up front, so you can send the invoice with the final deliverable.

Invoice for immediate payment

The invoice should request payment immediately, or failing that, at the end of the month and not only when you need the money. Smaller businesses are likely to comply, and bigger companies may rush faster to ensure you get paid promptly within their next payment cycle. Making the assumption that your client needs leeway or payment time scales well into the future only guarantees your invoice loses priority.

Check your clients

If you are going into a large contract, it’s wise to do some groundwork on your client. One of the biggest reasons for non-payment is the client’s own cash flow worries. Getting some intelligence from other clients, or if possible, running a background check on them, will ensure you don’t invest huge amounts of time and resources into defaulting clients. If you do establish a client might default, you don’t have to cut them off, simply invoice with the intention of being paid up front, or at least request a deposit and include a punitive “late payers’ fee” or interest on non-payment to encourage them to prioritise you.

Never miss the payment cycle

Your larger clients are going to be fanatical about their payment cycles. Ask them upfront when they need to receive invoices and make sure you get the invoice in before that date. Failure to do so will often mean a 30 or even 60 day delay in payment.

Request Debit orders

If you have a client who uses the same service regularly, don’t be afraid to ask for retainers and other contracts, to be paid by debit order, to cover the costs rather than invoicing each month. Be sure to offer perks to encourage your clients to take you up on these offers.

Build relationships

When it comes time to pay, even struggling companies will want to pay the people they know and like first, over the anonymous supplier. Knowing who at your client is responsible for the invoice and following up politely with them is a great way to ensure your invoices are treated with priority.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 30, 2024

Business

Build Your Team Stronger This Year

“Great things in business are never done by one person. They’re done by a team of people.” (Steve Jobs)

There are many benefits to having a great team, and these have been backed up by scientific research around the world.

These include, for example:

Improved productivity, with thousands of employees noting that having the respect of their peers is the number one reason they go the extra mile at work.
Better problem-solving, as team members pool their diverse unique talents and skills to find smart solutions to ever-more complex problems.
Generation of innovative ideas as team members with different experiences, opinions and perspectives collaborate.
Taking more calculated risks, as team members know they have the support of a team.Personal growth, increased job satisfaction and reduced stress are all benefits of working in a team.
Reduced risk of burnout as the workload is shared among team members.

Five steps to build your team stronger

Take care of the basics with the help of your accountant
- Ensure fair remuneration and that each team member’s salary is optimally structured.
- Put the basics in place: Employment contracts, salary slips, leave and sick leave, job descriptions and performance reviews.
- Offer incentives for employees to increase their earnings – from simply working extra hours to profit sharing for achieving company goals.
Provide the right skills and tools for each team member
- Team members should have a clear understanding of their roles and responsibilities, and how it contributes to achieving the team’s goals.
- In addition to safe, clean and friendly working conditions, each team member should have the right skills and the right tools to make their contribution to the team’s success effectively and efficiently.
- Be sure to provide practical means to track the team’s progress to maintain motivation.
Offer perks that matter!
- Non-monetary perks that have proven to be very popular include flexible working hours, extra time off, transport, childminding facilities, fun social activities and opportunities to volunteer during work time.
- Health and wellness programmes are an affordable and practical option to help team members to better care for their health, improving productivity and reducing both absenteeism and presenteeism (when team members are at work, but are too ill to perform their duties).
- Financial wellness programmes can provide team members completely confidential assistance to deal with the financial stress that is known to negatively affect work performance.
Ensure open and regular communication
- Regular and prioritised communication – from weekly team meetings to reports with regular due dates are crucial to share information and provide feedback to the team and individual members.
- Provide all team members with opportunities to share their input, actively seek out suggestions, listen to understand and work to build consensus, which is likely to result in the best decisions.
- Define common goals and clear steps to achieving these goals.
Celebrating successes and implementing lessons learned
- Be certain to celebrate milestones and successes with the team, recognising each team member’s efforts.
- Define the lessons learnt from failures and adjust the team’s approach accordingly.
- Consider team-building activities that can foster cooperation and build trust and team spirit.

This year, build your team stronger with these simple steps, and set your company up to enjoy all the well-documented benefits of great teams – from increased productivity to better problem-solving and innovation – in the year ahead and beyond.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 30, 2024

Business

Adapt or Die: How to Develop a Digital Transformation Strategy

“At least 40% of all businesses will die in the next 10 years… if they don’t figure out how to change their entire company to accommodate new technologies.” John Chambers, former CEO of Cisco Systems)

Around the boardroom tables of the world, one thing is on every agenda – digital transformation. From global conglomerates to SMEs, leadership is keenly aware that in a digital world, those who do not adapt will quickly become irrelevant. In fact, a recent study revealed that 55% of businesses believe they have less than a year to digitalise before they start to suffer financially and lose market share. Businesses must adapt to stay ahead of the game.

By integrating advanced technologies across all aspects of the enterprise, businesses are able to significantly improve a business’s efficiency by automating manual processes, reducing errors and improving productivity. This allows them to not only keep up with the competition, but also to enjoy greater efficiency, productivity and customer satisfaction. This process of implementing these modernising technology advancements is referred to as a digital transformation.

However, the process of digital transformation is not one a company should enter into lightly as it’s not simply about implementing the latest technology and tools. The goal of digital transformation isn’t just to eliminate manual processes, but to augment your operations, streamlining workflows and improving the customer experience. This must all be considered within the context of your budgets, timelines and overall business goals, while managing organisational risks. As a result, it’s imperative to develop a digital transformation strategy which takes into account all of these aspects and potential pitfalls of an overhaul of this nature.

Get buy in from the highest levels

A digital transformation is a necessary change, but it can’t work without buy in and leadership from the top down. This is something the company needs to do together, and some tough choices are coming. With a likely high price tag and disruptions on the cards, the company is about to go through a challenging time; making sure everyone at the top understands this is a powerful first step.

Analyse your current system

Before embarking on your digital transformation, you will need to know exactly what needs to change. To do this you will need to do a complete, top to bottom analysis of your current technology and systems in order to:

Review business processes and highlight inefficiencies
Identify technology gaps or areas where your existing systems fall short
Define functional capabilities needed to effectively support or improve your processes.

Develop your company mindset

Digital transformations are not as much about technology as they are about change. A thorough digital transformation will likely change the way everything is done in your company and will therefore require a culture of agility, communication and open mindedness.

Leaders will need to take ownership of the transformation and prepare all involved well ahead of any actual proposed developments. Employees, clients and other stakeholders will all need to understand the transformation strategy and how it will affect them. Training sessions will need to be organised and feedback sessions should be incorporated into the strategy at each step to see if the changes are working as proposed. This is an exciting time that will hopefully end up with your employees working on fewer mundane tasks and clients getting better service. Make sure they know that this is what the effort is about.

Budgeting and finances

With so much exciting new technology around it’s easy to get carried away with what you decide to implement. It is important that whatever projects go ahead are done to the benefit of the business and that they do not put pressure on cash flow and savings for other projects. Speaking to your accountant should help you determine which areas are most critical for advancement, and which will have the biggest impact on company operations. They will also be able to assist you in developing a roll out plan, so you can be sure to get all you need within a reasonable timeframe.

Analyse the necessary technologies

It’s one thing to read about these new technologies online and quite another to truly understand how they might impact your workplace. Proper research and expertise need to be included when deciding which elements of cloud computing, edge computing, AI, Data Analytics and Digital Experience will make a difference for your business. Would better reporting help you to make decisions? Do you have a large remote force that needs better organisation? Do you have a factory floor that could do with less wastage? Your business’s needs will determine where you have to invest.

Work with good partners

Your digital transformation is not the time you want to cut corners with your technology partners. When choosing which solutions to use, don’t be afraid to ask the hard questions around whether the technology is scalable and easily adaptable for future needs. Does your partner share the same vision as your organisation? Do they understand your industry? Do they provide support for upgrades and downtimes, and what does that support look like? Will you be down for a day or a month? Does the technology work with your current systems, or will you need to retrain everyone? How future-proof is your partner?

Education and training

Critically, you need time and budget to educate and train your staff on your new systems. It’s futile implementing new technology if no one can use it. This needs to be built into your timeline. As an added benefit, investing in employee training has been shown to increase employee satisfaction, business efficiency and consistency so don’t be afraid to give your employees the skills they need to operate in a modern workplace.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 30, 2024

Tax

Your Tax Deadlines for February 2024

07 February – Monthly Pay-As-You-Earn (PAYE) submissions and payments
23 February – Value-Added Tax (VAT) manual submissions and payments
28 February – Excise Duty payments
29 February – CIT Provisional Tax payments
29 February – PIT Provisional Tax payments
29 February – Value-Added Tax (VAT) electronic submissions and payments

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 30, 2024

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Business

2024: Best Year Yet for Your Business?

“The best way to predict the future is to create it.” (Peter Drucker)

Facing what may well be another tough year, company owners and managers will be well aware that many of the external challenges will be beyond their control.

Fortunately, what remains under your control is how this new year is approached and starting 2024 with a thorough understanding of the three metrics below will ensure that this could be the best year yet for your business –

The business’ past performance,
Its current status, and
Its mission for the new year.

You don’t need an MBA or special knowledge to assess the company’s past performance, to understand the present situation, or to plan for the year ahead. Just schedule some time with your accountant, take inventory of what’s truly going on in your business and decide how to make 2024 your best year yet.

Assessing the past

An assessment of the company’s performance over previous years provides invaluable information about what is working and what needs to be changed.

A relatively quick and easy way of assessing the past performance is looking at the business accounts and financial reports.

For example, your profit and loss (P&L) statement, or income statement, will reveal reasons for periods when net losses were recorded (for example, slow business periods or extraordinary expenses) as well as raise red flags where expenses regularly exceed income.
A balance sheet summarises total assets and total liabilities, showing the company’s financial position and measuring liquidity or ability to pay short-term liabilities.
Summarising expected cash inflows and outflows over a period, a cashflow report reveals where the most cash is generated and used; highlights potential cash flow problems and enables informed budgeting and spending decisions.
Regular debtors’ reports enable proactive management of current and overdue invoices to improve cashflow. Similarly, budget vs actual spend reports compare actual spending to the amounts budgeted for the period, to reveal areas over or under budget and to flag problem areas.

Determine where the business is now

Review the business operations, successes and challenges, and the reasons for missed targets, whether simply drawing on paper or using special software. Understand the company’s current capacity for production and its performance – how many targets met, on target and/or overdue. This enables current strategies, practices and operations to be evaluated, and to pinpoint what is working or not.

Also look at customer satisfaction and retention rates, as well as employee satisfaction, both of which can be assessed through electronic surveys or simply speaking to clients and staff.

Planning ahead

Building on what’s working and realising that doing things differently is the only way to achieve different results, you can choose the goals that will create the future of your business.

Specific, Measurable, Achievable, Relevant and Time bound goals – or SMART goals – focus your team’s efforts and increase the chances of successfully achieving the targets, particularly if these are supported by step-by-step plans, a budget for the required resources, accountability assigned to specific people, and ongoing reviews to track progress.

SMART goals are crucial for achieving success, as they provide a clear focus, specific targets to work towards and motivation for the entire team.

Assistance is at hand

Your accountant will be able to assist you with the financial reports that will allow you to assess the past and present, with advice in respect of tracking non-financial metrics, and with planning for the year ahead – so remember: help is at hand to ensure you approach 2024 with clarity and a solid plan to make it your company’s best year yet.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 5, 2024

Read more about the article How to Survive Ongoing High Interest Rates in 2024

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Business / Economy

How to Survive Ongoing High Interest Rates in 2024

“Inflation is bringing us true democracy. For the first time in history, luxuries and necessities are selling at the same price.” (Robert Orben, comedian and writer)

Interest rates and inflation are a nasty partnership that can, if managed badly, derail any small to medium enterprise. Their effects are felt in every area of the business and if they are not addressed correctly, high interest rates can have a significant impact on business, driving up costs, slowing growth and minimising competitive advantage.

Governments use high interest rates to manage the impacts of inflation. When inflation is growing, people should expect interest rates to do the same. Unfortunately, the global phenomena that have been driving increased inflation over the past few years show no signs of slowing down – the Ukraine war drags on leading to both oil and food supply issues, while supply chain issues and the pandemic’s grasp are both proving more difficult to overcome than expected. This has meant that economists have abandoned any hopes for lower rates in 2024 and have instead coined the mantra, “Higher for longer”.

What does this mean for your business in 2024?

More difficulty borrowing: Rising interest rates leads to businesses paying more to borrow money and reduces the ability to pay debts that have already been incurred. High debt repayments may make it difficult to finance new expansion projects or invest in new products and services, which in turn can stifle growth.

Less demand: Customers feel high inflation too. They may turn to buying cheaper products thereby eroding the competitive advantage your company once held, or they may give up on your service altogether. This too can have long-term impacts on growth plans and could severely impact cash flow.

Declining reserves: Longer high interest rates may mean businesses are required to dip into their cash buffers to service debts or simply to cover costs as earnings slowly dip.

Improved earnings on cash: Those companies with large cash reserves can see benefits in times of high interest as the return from banks improves.

Faltering competition: Those companies in good standing may also find their competition struggling. This is the perfect time to seize additional market share.

How to thrive in high interest conditions

Assess your weaknesses: Evaluate the risks associated with your business operations. Take into account elements like how sensitive your income sources are to economic fluctuations, dependence on particular clients or suppliers, and any external influences that could affect your financial strength. Recognizing potential risks and vulnerabilities empowers you to create tactics that lessen their effects when confronted with an interest rate increase.

Trim expenses: It’s time to go through your monthly expenses and see where you can save. Are you getting the best deals on rental, internet, and office supplies? If your staff are largely working from home, can you afford to move into a smaller office? Consider outsourcing jobs that aren’t part of your core business – PR, designers, IT professionals and even HR and Admin are good places to start.

Refinance debt: Take careful note of the debts you have. Is there some way you can refinance them to your benefit? If you are paying off a lot of small, high interest loans such as credit cards, it might be wise to see if you can consolidate them all under one larger, lower-interest debt. Understanding the details of your outstanding debts enables you to assess how an increase in interest rates might affect your monthly payments and overall financial commitments.

Increase prices: If you have resisted raising prices thus far it might be time to take a look at whether an adjustment is in order. You are likely paying a lot more for your raw materials and supplies than you did a year ago, while delivery costs, advertising and everything else have been climbing as well. If you are managing with the lower prices, then is it possible to turn this to your advantage and aggressively market to snatch a greater portion of the market from competitors who just got a lot more expensive?

Create a business buffer: Cash flow can be the biggest killer during times of high interest rates. Clients may be struggling to pay off their debts leading to you receiving late payments or even no payments at all if they go under. Consider applying for overdrafts or lines of credit so you are prepared should anything go wrong. If you are able, start building a cash buffer to further protect your company.

Invest in marketing: Any additional money should go into advertising. The interest rates will eventually start dipping and when they do customers are going to go to the people who are most top of mind. According to a study conducted in 2018 by the Ehrenberg-Bass Institute, brands that halt their advertising efforts for extended periods typically encounter a 16% decline in sales within the initial year and a 25% decrease after two years.
However, this doesn’t mean simply throwing money away in the hopes of future income. Look at your product offering and focus on advertising those brands and items that might appeal to your clients in times of crisis. Remember, you may need to adjust the channels you market in as your customer’s purchase decisions on their media are likely to be impacted by increased pricing.

Get expert advice: If you feel uncertain about scrutinising your financial records or evaluating your financial standing, ask your accountants for help. Their specialised knowledge can offer valuable perspectives and counsel customised to address your unique business requirements.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 5, 2024

Read more about the article How to Achieve Tax Compliance Throughout 2024

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Tax

How to Achieve Tax Compliance Throughout 2024

“SARS is willing and ready to assist taxpayers who want to be compliant. Where taxpayers willfully and intentionally ignore their legal obligations, SARS will act sternly.” (SARS Commissioner Edward Kieswetter)

Businesses are often required to share their tax compliance status, for example for a tender application, bidding process or prequalification as a supplier; to confirm that their tax affairs are in order with SARS; to receive payment; or for foreign investment allowances.

This is because proof of tax compliance is accepted as an indicator of how well a company is managed and its good standing in terms of its legal obligations. Tax compliance also saves time and money.

SARS provides clear advice to owners of small, micro and medium enterprises (SMMEs) on how to achieve tax compliance, both in the business and in their personal capacity, including a recommendation to seek the advice of an accountant.

Which tax types apply to you and your business?

This handy table from SARS details the tax types that generally apply to SMME businesses and their owners.

Source: SARS

Compliance life cycle

The “compliance life cycle” as SARS calls it, applies to each one of the tax types for which the business and the owner are liable.

It involves completing these steps in your tax relationship with SARS from beginning to end:

Registration on SARS’ system for each tax type applicable;

Timely and correct declarations or returns for each tax type, including submitting relevant supporting documents;

Timely payments where a tax liability exists; and

Deregistration from tax types if the business is liquidated or closed.

To meet these requirements consistently across all the relevant tax types over the tax year, in an always-changing tax landscape, taxpayers should consider professional assistance.

Consequences of non-compliance

Non-compliance is a costly choice, generally involving penalties and interest, as well as additional fees to rectify, and potentially further losses, such as losing a business opportunity or the confidence of clients, stakeholders and investors, or suffering reputational damage.

In addition, not registering for a tax type to evade paying taxes, as well as the non-submission of tax returns are criminal offences, which may result in a fine, imprisonment or both.

Outstanding returns will also negatively affect tax compliance status, and administrative penalties that will attract interest may be incurred for non-submission.

Where tax liabilities have not been paid, and no payment arrangement has been made, penalties and interest will also apply, tax compliance status will be affected, and SARS may appoint third parties, such as a registered bank, to recover the outstanding tax.

Ensuring compliance

Human errors and simple mistakes are common given the complex tax types, rules and strict deadlines. Nevertheless, a taxpayer can be found guilty of an offence without SARS having to show that the taxpayer committed it wilfully, deliberately and knowingly. It means that even unintentional or administrative errors can be penalised with a maximum penalty and, in some cases, criminal sanctions.

This makes it essential to rely on your accountant, who is not only well-versed in the requirements and deadlines of the various tax types applicable to your business but is also up to date with the latest rules and processes, and how it affects your tax compliance.

“Employing an accountant, tax practitioner, or other tax professional to complete returns, or from whom to obtain advice before completing a return with entries that are not understood or adopting a position with tax implications” is among SARS’ recommended ways to ensure reasonable care has been taken by a taxpayer.

It is our best advice too for tax compliance throughout 2024.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 5, 2024

Portrait of happy waitress standing at restaurant entrance while looking outdoor. Portrait of young business woman attend new customers in her coffee shop. Smiling small business owner showing open sign in her shop while leaning against the door.

Business

Why January is the Perfect Time to Start a Business

“The way to get started is to quit talking and begin doing.” (Walt Disney)

Whether starting a business is your New Year’s resolution or something you have been waiting to do for years, if you are thinking of launching it in January 2024, then you have already made a wise decision. January is a popular month to officially launch new businesses, not just for those inspired by a New Year’s Eve conversation, but for seasoned entrepreneurs. There are several reasons why January is so popular. Perhaps they will inspire you to make it your foundation month too?

You have the energy

Coming off a holiday and filled with the buzz of a new year is the perfect time to launch a business. New businesses require long hours and energy you may not have after a year in your corporate job, but that short break can do wonders for your energy and give you just the lift you need to get it all started.

January is a slow month

Following on from the Christmas spending boom and a lazy holiday it usually takes corporates a few weeks to get back to full speed. While this might sound terrible to someone eager to get going immediately with a new venture, it’s a big benefit. There are a lot of admin tasks that need to be done to launch a business, from registering with the CIPC to opening a bank account, drawing up business and financial plans and getting your logo designed, so having a quiet first month to get that out the way while you aren’t missing out on sales will help.

Hiring

According to TransformSA, January in South Africa is the month when the highest percentage of people quit their jobs. Following on from the holiday many unsatisfied, driven or unsettled people decide they can’t face another year of doing the same thing and leave looking for something else. As a start-up, this means that there are many more people on the job market looking for a new opportunity and you stand a greater chance of finding the right people for your enterprise. Given that you will be starting small, it is absolutely critical to get the first few hires right, and January’s talent pool will make that easier.

Refreshed clients

Just like employees, potential clients are also arriving at work eager to do something new and exciting. It is extremely common for business leaders to use the chance of a quiet January to go over the past year’s figures and reevaluate client relationships and long-standing suppliers. This is the perfect time to walk into their offices with something fresh.

Lower advertising costs

Studies show that the fourth quarter of every year is by far the busiest when it comes to advertising, while quarter one, and particularly January can be a problem. If you are looking to do a significant amount of advertising, walking into a publisher to negotiate ad space in January is a power move that could see you net a reasonable discount if you play your cards right.

Align your year-end with financial year-end

The financial year in South Africa runs from March 1st to February 28th. Launching a business in January and issuing your first invoices in March could see you perfectly placed to have your year-end line up with the end of the financial year in South Africa helping you to keep things simpler and more manageable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 5, 2024

Read more about the article Your Tax Deadlines for January 2024

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Your Tax Deadlines for January 2024

05 January – Monthly Pay-As-You-Earn (PAYE) submissions and payments
24 January – End of Filing Season for Provisional taxpayers
24 January – End of Trusts Filing Season for taxpayers liable for provisional tax
30 January – Excise Duty payments
31 January – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments where applicable.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.

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January 5, 2024