7 Effective Business Lessons Inspired by Madiba

“We can in fact change the world and make of it a better place.” (Nelson Mandela)

Rolihlahla Mandela was born into the Madiba clan in Mvezo, Transkei, on 18 July 1918. He was given the name Nelson by a teacher on his first day at school. Affectionately known as Tata, grandfather of the Rainbow Nation, Mandela is best remembered for successfully leading South Africa’s transition from apartheid to a multiracial democracy.

Mandela is the only person honoured by the United Nations with his own international day: Nelson Mandela Day on 18 July each yearOn this day people around the world honour Mandela’s contributions and humanitarian work by following the example he set. He donated half of his presidential salary and part of his Nobel prize money to help street children. And he established the Nelson Mandela Children’s Fund which continues his legacy by focussing on education, HIV/AIDS and ‘peace and reconciliation’.

Nelson Mandela’s life and words of wisdom provide inspiration that can help you lead your business to greater success.

1. “Everyone can rise above their circumstances and achieve success if they are dedicated to and passionate about what they do.”

Passion and dedication are crucial to successful business: passion drives innovation and creativity, and dedication keeps you going when things get tough.

2. “Vision without action is just a dream, action without vision just passes the time, vision with action can change the world.”

As an entrepreneur or business owner, vision is vital. But it doesn’t count for anything if you and your team don’t take action to make it a reality.

3. “The mark of great leaders is the ability to understand the context in which they are operating and act accordingly.”

Today’s business context is more complex, multifaceted, and fast-changing than ever before, requiring agility in both decision making and execution.

4. “After climbing a great hill, one only finds that there are many more hills to climb.”

Entrepreneurship and business ownership inherently entail challenge after challenge, day after day, year after year. Expect and embrace challenges, focussing on finding the opportunities they hold.

5. “The brave man is not he who does not feel afraid, but he who conquers that fear.”

We all face many kinds of fears all the time: fear of failure, disappointment, the unknown, even of success. What sets entrepreneurs and business owners apart is that they don’t allow fear to stop them – they are brave enough to try, to step out, to take the risk … despite the fear.

6. “Education is the most powerful weapon which you can use to change the world.”

Continuously educate yourself to better manage and grow your business. Also educate and upskill your employees on an ongoing basis: offer mentorships, internships, learnerships and apprenticeships; facilitate capacity building for Non-Governmental Organisations (NGOs); and sponsor schools or scholarships in the community or in your industry.

7. “Overcoming poverty is not a task of charity, it is an act of justice.

Even small businesses can make a meaningful contribution, and it makes sense to start in your immediate community. Make an authentic, long-term contribution that will have a lasting impact, by focusing your company’s contribution around your product, service or expertise, and aligning it with your vision.

Hopefully you can apply some of Mandela’s wisdom in your own business. And don’t forget to give 67 minutes of your time on 18 July.

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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How to Breeze Through a SARS Audit

“The aim of a tax audit is to determine if the taxpayer has complied with the relevant legislation administered by SARS.” (SARS)

During a tax audit, SARS examines financial statements, accounting records and supporting documents to check if you or your business correctly declared your tax position on a tax return. If you didn’t submit a return, an audit will investigate if your actions complied with tax law.

Either way, being selected for an audit – whether for income tax, VAT, employees’ tax or capital gains tax – poses significant risk.

What are the risks of an audit?

A substantial amount of time, cost and effort can be required to collate the information, documents and clarifications needed to complete an audit … Especially if the audit spans several years.

If you don’t submit the requested audit information, SARS will raise a revised assessment, determining the amount of your tax liability or refund, based on an estimate from information readily available or obtained from a third party, even if this information is incomplete.

What’s more, an audit can lead to the levying of understatement penalties of up to 200% of the shortfall where an understatement occurred. The 200% penalty is levied in instances where the taxpayer is either a repeat offender or is being obstructive and  is also guilty of intentionally evading taxes.

Worst case scenario

An audit can even result in criminal proceedings. It’s a criminal offence to refuse or neglect to supply relevant material requested by SARS without just cause. And remember: SARS is no longer required to prove that a taxpayer wilfully committed a tax crime – taxpayers can now be found guilty of a tax crime if a mistake was made, or in cases of negligence.

The risk is intensifying

SARS audits are increasingly common. Any taxpayer can be selected for audit, based on any consideration, including on a random or cyclical basis, or on a risk assessment basis. Even tax-compliant companies and individuals that get clean audits every year are regularly audited.

Taxpayers are flagged for audit through SARS’ sophisticated case selection methodology. The taxpayers most likely to be audited include those who earn additional income and those whose tax returns do not align with information from other sources, for example, where there is a mismatch between the annual turnover and the VAT declarations for the year.

The audit process
  1. A Notification of Audit letter provides the initial scope of the audit, documents required, and details of the SARS auditor.
  2. SARS can request additional material at any time, and they can obtain information from third parties.
  3. SARS prefers to receive audit documents electronically via eFiling or for them to be submitted at a SARS branch, but collection or delivery of documents can be arranged.
  4. An audit can take between 30 business days and 12 months to complete – or even longer in some cases. The time taken to complete an audit depends on the complexity of the specific case.
  5. SARS will provide progress reports on the audit every 90 days.
  6. If SARS agrees with your tax position, it will issue a Finalisation of Audit Letter to conclude the audit.
  7. Alternatively, SARS will issue an Audit Findings Letter which details the grounds of the assessment, amounts due, and payment deadlines.
  8. If you disagree with SARS’s findings, you have 21 days to respond. You must provide evidence to support your dispute.
  9. Refunds will only be paid once the audit concludes.
Breezing through the audit process

Luckily most audits we deal with end happily. Here are a few pointers to ensure yours does too.

  • Keep correct and accurate records: Speak to our team today to ensure you’re up to date with all legislative requirements.
  • Act immediately: If you receive a Notification of Audit letter, contact us immediately. We can provide advice and manage the ongoing communications with SARS on your behalf, while collaborating with the auditor to avoid penalties.
  • Rely on expertise: Our team will guide you through the audit process – from clarifying what documents are required, to submitting these documents in the required format, and managing the next steps in the process, we’ll do what it takes to ensure a successful audit.
  • Protect your rights: SARS is legally required to follow the audit process by the book. We will ensure you receive fair tax treatment and audit outcomes.
SARS audits are here to stay. But they’re nothing to worry about if you have all your ducks in a row.

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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5 Top Employee Retention Strategies

“People want to know they matter and they want to be treated as people. That’s the new talent contract.” (Pamela Stroko, Vice President, HCM Transformation & Thought Leadership at Oracle Corporation)

Any business leader knows that hiring the best team possible is the first step to success, so it stands to reason that keeping them around is just as important. What’s more, finding, hiring and training new employees is an expensive process.

As the world becomes increasingly connected, the battle for top talent has expanded beyond the city you’re based in. On top of this, job apps have made it even easier for your employees to find work elsewhere if they are not entirely happy.

This has all put employee retention in the spotlight. What are employees looking for? What makes them stay? And just what does your business need to do to keep your best staff on your books? These five tips will help regardless of the kind of business you run.

  1. Level up
    For a long time, business management experts recommended employing outside of the company. This advice has now changed completely: Experts now say you should promote your existing staff.

    Your employees want to grow in their careers. Of course they do. While they might be happy now, if there’s no opportunity for advancement they’ll soon start looking elsewhere. A 2018 report found that 93% of employees would have stayed at their jobs longer if those companies had invested in their careers.

  2. Teach a man to fish
    Employees also benefit from personal and professional skills growth. It’s vital to ensure your team is up to date on the latest technologies, but it’s also important to facilitate growth in directions of their own choosing. This doesn’t just benefit them – it also brings new skills into your company.

    By giving your staff time to attend conferences, giving them study leave, or paying for continuing education you are guaranteed to improve your team and keep your employees for the longest possible time.

    You should also consider implementing a mentorship system where newcomers and younger staff are tutored and advised by senior staff members. Studies show that mentorship benefits both the new arrival and the old hand.

  3. Family matters
    Since the pandemic, people have become much more precious about their personal lives. If you acknowledge that your employees have lives beyond the office (fancy that!) you’re far more likely to retain them.

    Flexible working hours, remote offices, and even childcare support are now vital if you hope to keep employees in the long term. If you run a business where remote work isn’t possible, why not consider flexitime, or a shorter work week instead? Removing the stress your employees feel over their families has the added advantage of making them perform better when they are in the office.

  4. Pound of flesh
    Gone are the days where you could forbid employees to talk about their salaries. Income information is freely available, and your employees are constantly checking their earnings against those offered by the competition. Don’t kid yourself: If you aren’t paying a fair wage with good perks, your employees are probably already sending out their CVs.
  5. Pat on the back
    Everybody wants to feel appreciated. Saying “thank you” may not seem like much, but it can make an enormous difference to an employee’s happiness. Some companies set up formal reward systems to recognise and encourage employees. But recognition doesn’t have to be formal to be effective. If it’s heartfelt and real, a little really can go a long way.

Only you can build an environment that encourages employees to stay. But as your accountants we can provide the budgeting and tax advice that makes it a reality.

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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Is Venture Capital Right for Your Business?

“One of the fun things about venture capital is you are constantly learning new ideas and strategies from one business and then applying them to others.” (Joe Lonsdale, technology entrepreneur and investor)

At its simplest, the term Venture Capital (VC) simply refers to capital that’s invested in any business or project where there’s an element of risk. Typically, this refers to innovative new companies, but it can also refer to money invested in everything from opening a new branch, to updating your factory or building a new wing on your restaurant. Every deal you see on Dragons Den is a venture capital deal.

It’s true that venture capitalists tend to invest in companies that look likely to disrupt big markets, and those with patentable ideas or innovative services. But VC funding is an option for all businesses. It’s usually offered in exchange for a minority stake in your business.

If you’re considering VC for your business, you need to understand the pros and cons.

Advantages of VC
  1. Show me the money
    Venture capitalists can provide the funding necessary to either build your start-up from scratch or to expand your existing business. The cash can come in a single lumpsum payment or through additional funding rounds as needed.
  2. Learning curve
    Because they’ve often had experience working with similar companies, venture capitalists can offer strategic and operational guidance to help your business thrive.
  3. It’s all about who you know
    Most venture capitalists bring a valuable network of contacts. They can often assist with hiring key personnel, accessing international markets, connecting with strategic partners, and co-investing with other firms when you need more funding.
Disadvantages of VC
  1. It’s a control thing
    When you take money from a venture capitalist, you gain a new business partner, and you lose a portion of your ownership and control. Depending on the deal, this could mean you’re now working with someone whose methods are different to yours and who may want to take the company in a different direction.
  2. Pressure to sell
    Venture capitalists usually earn their money when a company “exits”, either through a sale, or an Initial Public Offerings (IPO). It goes without saying that they can often have different goals and ideals to you, the business owner – especially if you want to own and run your own business indefinitely.
  3. Grow – or else
    Venture capitalists may come with stringent requirements on growth: how fast they expect it to happen, and which targets they need to hit by certain dates. Depending on your contract, you may find the funding you expected is not released when the goals are missed.

VC has some large positives and can be a massive help to both new and existing business. However, it does also come with some large concessions.

If you are considering VC in your business, speak with us. We can help you determine the best way to meet your needs and your business goals.

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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Your Tax Deadlines for July 2024

  • 05 July – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 July – Value-Added Tax (VAT) manual submissions and payments
  • 30 July – Excise Duty payments
  • 31 July – Corporate Income Tax (CIT) Provisional Tax payments
  • 31 July – 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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Use This SARS Incentive to Bring Young People into Your Business

“The employment tax incentive is aimed at encouraging employers to hire young and less experienced work seekers.” (SARS Employers ETI Guide)

With Youth Day celebrations around the corner, business owners have an opportunity not only to consider unlocking the benefits of having young workers in their teams, but also to make a difference to South Africa’s dismal youth employment rate.

What are the benefits of hiring young employees?
  • More likely to be technologically savvy, younger employees have a positive impact on the adoption and use of new software and technology in a company.
  • They also give companies that target the millennial market an advantage, as they can reach and communicate with their peers.
  • Wages for young employees are lower, making them the cost-effective choice for entry-level positions, freeing up experienced workers for strategic level work.
  • Younger people are better equipped to respond to sudden change and unexpected circumstances.
  • Companies have an opportunity to develop a workforce specifically trained to meet their business needs and culture.
  • Young workers bring paradigm shifting ideas, fresh perspectives and different ways of thinking and working to their organisations.
  • Youthful energy, enthusiasm and creativity are great for team building, productivity and workplace morale.
  • Used to formal learning, young people tend to absorb training more readily.
  • Most young workers are eager to learn, build their experience and apply their skills.

Source: Unicef

One option businesses should consider to enable them to take on more young workers into their companies is to use the ETI incentive from SARS.

What is ETI?

The Employment Tax Incentive (ETI) is a tax concession encouraging employers to hire more young people aged between 18 and 29 years. It reduces the employer’s cost of hiring young people through a cost-sharing mechanism with government while leaving the earnings received by the employee unaffected.

This incentive offers a wide benefit. Employers are financially incentivised to hire more young people, and young people gain valuable work skills and experience, benefiting the wider economy.

It complements existing government programmes with similar objectives e.g. learnership agreements, and it will be available until 28 February 2029.

Who qualifies for ETI?
  • Employers who:
    • are registered for Employees’ Tax (PAYE)
    • are tax compliant
    • meet these qualifying criteria on an ongoing basis.

It is however important to note that certain employers (e.g. those in the national, provincial or local sphere of government and certain public entities) are specifically excluded from utilising the ETI.

  • Employees who:
    • have a valid South African ID or permit
    • are aged between 18 and 29 years old
    • earn between minimum wage or R2000 and R6500 for a 160-hour month
    • who are not domestic workers or “connected persons” to their employers
    • meet these qualifying criteria on an ongoing basis.

Employers operating within a Special Economic Zone will, provided they meet certain criteria, not be subject to the age limitation highlighted in the second bullet.

How does ETI work?

ETI can be claimed for a 24-month period for all employees who qualify. The monthly value for the ETI reduces the amount of Pay-As-You-Earn (PAYE) due by the company and is claimed by correctly completing the ETI field on the employer’s monthly EMP201.

The value of the incentive amount is not static but depends on the value of the monthly remuneration paid to the qualifying employee and must be calculated each month for each qualifying employee using the table below.

Source: SARS

Examples of ETI savings 

The amount of the rebate reduces in the second 12-month period. In addition, as the monthly remuneration increases, the amount of the rebate reduces: at the upper limit with a monthly remuneration of R6400, the monthly rebate is just R75 per month.

The ETI can only be claimed in the months in which the employee was a qualifying employee (i.e. the employee may, due to the remuneration paid to them, be a qualifying employee in the first three months but not in the fourth and fifth months. If the employee is a qualifying employee in the sixth month, the sixth month is month number four as far as the 12-month period is concerned). Further to the above, should the number of hours worked by the employee in the relevant month be less than 160 hours, the ETI claimed is to be apportioned accordingly.

However, there is no limit to the number of qualifying employees for which a company can claim ETI, and especially in labour-intensive environments, these rebates will add up on a monthly basis, and certainly stack up over two years.

Claiming the incentive may however not result in the employer’s EMP201 monthly declaration reflecting a negative amount. Should this be the case, the employer should reflect a net PAYE amount of R Nil.

ETI pitfalls
  • If an employer claims ETI for any employee who does not qualify, penalties equal to 100% of the ETI claimed will apply.
  • Penalties imposed will result in under-payment of PAYE, which will attract interest and penalties.
  • Companies cannot displace existing employees to employ a worker who qualifies for the ETI – a penalty of R30 000 will be levied for each employee so displaced.
  • Meticulous recordkeeping is required by the ETI Act.
  • Companies may face time-consuming and costly verifications and audits of their ETI claims.
How to take advantage of this incentive

When correctly calculated and administered, ETI is a significant opportunity for businesses, especially smaller companies, and those with large labour forces, to scale their activities at potentially lower costs.

Sadly, many small companies are not taking advantage of this incentive, and according to research done by Sage, the top reasons include concerns surrounding increased admin and a fear of claiming ETI incorrectly.

We are ready and able to assist you to determine whether ETI is suitable for your business and to correctly calculate and administer this tax benefit for you, ensuring your business can enjoy all the benefits of young workers as well as a potentially substantial tax reduction over the next two years.

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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How to Implement Effective Leadership Development in your Business

“Leadership and learning are indispensable to each other.” (John F. Kennedy)

The world of work is changing, rapidly. With more teams made up of diverse people from a wide variety of locations, leadership these days has become less about personal relationships and more about managing across distance and effective organisation. Leaders in this world need skills they had never considered previously, and companies need to train them.

Despite companies spending hundreds of billions of rands in leadership training globally, 63% of millennials feel their leadership were letting them down and only 27% of leaders believe they are equipped to lead hybrid teams.

Here’s what you should be thinking about when implementing leadership development in your organisation.

1. Analysis and Assessment

In order to build leadership capacity for the future, the first thing you should do is look at your organisation’s unique values, challenges, and priorities. Are you looking to increase profits, cut costs, improve employee retention or mitigate risks? Remember, your analysis needs to focus not only on what’s happening now, but on the coming changes in your industry and your goals for where you want to be in the future.

Doing this will then allow you to take a closer look at the skills of your leaders as they currently stand and determine which leadership skills are most lacking.

2. Research

The next step is choosing which leadership training organisations to partner with. There is currently no shortage of leadership development resources, speakers and organisations that offer training. The resources you work with should be vetted, relevant, and applicable to learning goals you established in the analysis phase.

In order to ensure you are getting the best possible course you should evaluate the course material and format and research the course instructors. Who is offering this course? Do they have the requisite experience?

When it comes to making a difference, instructors with a strong educational foundation and relevant qualifications will always trump the charismatic author with multiple tattoos and a matric. As your accountants, we are able to help you build a training budget, which can help prioritise training and ensure you get the most impact from your spend.

3. Involve your seniors

You and your senior leaders understand leadership in the context of the company better than most and as such should play a mentorship role in the development of future leaders. Training engagement has been shown to increase dramatically for attendees when it is their leader who is among the teachers, so don’t be afraid to engage your team as an active part of the process.

This will also help you too. By taking part you will also be aware of the course content and can more easily spot teachable moments during the day-to-day running of the company, reinforce the lessons in their mentorship sessions and better spot those who are implementing the lessons in their own personal development.

4. Inform your employees

Building future leaders is about spotting talent, then using the training to position that talent for future company development. It is no good simply offering training without also informing those who are to attend of the reasons for why the training is happening.

Attendees need to understand the future company goals and recognise the skills they will need to perfect if they want to be part of the future leadership of the company. This way you’ll give them the motivation to engage with it as thoroughly as possible. Nothing inspires people quite like seeing the personal benefits.

5. Implement the training

Training should be simple. Whether you choose to do it all in one go, or over time fitted into a general working life, the courses need to be manageable in terms of time and effort. This means you are going to need to consider each individual attendee as well as your company’s operational needs. The easier you make it for everyone to be involved, at the lowest loss to the company, the more the return on investment will be.

6. Feedback, evaluation and impact

Training has no benefit if the lessons of that training are not implemented. It’s important to schedule feedback sessions with attendees to repeatedly follow up on the lessons in the training. Depending on your goals you may even be able to build the training impact into the attendees’ KPIs.

Some training sessions and companies will even incorporate evaluation and feedback into their sessions so you as a leader can analyse who is performing well in the course and who needs added focus. All of this will help you to adjust future training content and goals and ultimately ensure you get the most long-term impact and leadership growth.

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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Quick Tips for Preventing Time Fraud

“Fraud and deceit are anxious for your money. Be informed and prudent” (John Andreas Widtsoe, scientist, author and religious leader)

While accountants have become adept at spotting and preventing financial fraud simply by analysing a company’s books, there is another kind of fraud that needs alert leadership, record keeping and careful analysis to completely snuff out. Time fraud sounds like a concept from a sci-fi movie, but in reality, it’s actually quite a simple concept. Like with those who commit regular fraud, a time fraudster is purposefully stealing from the company, but what they are stealing is a much less tangible asset – time.

Time fraud is any kind of employee behaviour that knowingly steals time from a company. It could be as minor as taking an extra smoke break, or purposefully arriving late, but can also involve using extended company time for side projects, and even illegally clocking in for shifts that weren’t worked.

The 10-10-80 rule of business fraud says that 10% of employees will never cheat a company, 80% will cheat a company under the right circumstances and 10% are always actively looking for ways to cheat the company. This means that if it is unchecked time fraud can become a companywide problem that chokes profitability, irritates customers and destroys team morale. Here are our tips for making sure it doesn’t destroy your company.

Spotting time fraud
  1. Recognising the red flags

    Detecting time fraud is about watching patterns. An employee who comes in late occasionally is not a fraudster, one who comes in late every day just might be. Catching a time fraudster therefore requires you to pay close attention to the employee’s behaviour. Sometimes honest employees can be guilty of one or more of these things, dependent on their skill level or job requirements, but if they are adding up, you are likely looking at a thief.

    Is the employee regularly claiming they worked long hours, but getting very little done? Do they frequently miss deadlines? Are there inconsistencies in their time tracking or billable hours records? What are the employee’s colleagues saying about their efforts?

  2. The fraud triangle

    Fraud criminologist Donald R. Cressey has developed what he calls the Fraud triangle, a tool businesses can use to determine which employees are most likely to commit any kind of fraud, including time theft.

    As the name suggests, the fraud triangle asks managers to pay particular attention to employees who exhibit any of these three components:

    • Motivation: People with motivation to commit time fraud are more likely to do it. Motivation covers a wide range of incentives from the receptionist with a new boyfriend she loves chatting to on the phone, to the ambitious go-getter who is trying to start their own side-hustle.
    • Opportunity: Opportunity is much more common now when so many people work from home. Employees who would be able to indulge in time fraud without comment are much more likely to infringe.
    • Rationalisation: Again, employees who are able to rationalise their time theft are much more likely to do it. For example, if they believe the 30minutes they leave early each day isn’t missed by the company.
How to prevent time fraud
  1. Communicate concerns

    “Because of the 10-10-80 rule and the fraud triangle, preventing 80% of time fraud generally revolves around simply removing people’s opportunity to commit time fraud and their ability to rationalise it. Write up clear policies and procedures on time fraud and ensure that these are shared regularly with the team to show it does matter to you and that you are on top of it.

    Your communications should also show the downsides to time fraud such as overtime for teams to meet deadlines, bad relationships with clients and declining profitability which could lead to layoffs. Stripped of their ability to rationalise their theft, 80% of people will stop engaging in any time fraud and others will be incentivised to report colleagues who do still engage.

  2. Monitor your employees

    Monitoring employees sounds very 1984, but it does not have to be onerous and does not require micromanagement. It can be as simple as installing cameras at the entrance of the building or asking your managers to make a simple note each time an employee is absent, late or misses a deadline.

    It is important to keep a record of these things so that if it is ever necessary to meet up with an errant employee there is some kind of record of their wrongdoing to show them they are being watched.

  3. Audits and analysis

    When an employee becomes suspicious you may have to take things to the next level and begin auditing their time. Check what time they logged in, when they had their meetings and whether they were using their company laptops for something other than their work, by looking at their internet search history. Provided your employees bill by the hour, your accountant will be able to create resources that compare the fraudster with their colleagues to accurately gauge how much time is going missing.

    Those who fail audits should be invited to time management training and be advised that if their behaviour does not correct itself, there may be consequences.

At the end of the day, those who are determined to scam the system will find ways to do it. For these employees nothing short of hearings with the threat of eventual dismissal will likely work to prevent their behaviour. If, however, you simply implement the rules above, the 10-10-80 rule suggests that 80% of all time fraud should vanish, leading to a much more productive, happy and profitable company.

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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Read more about the article Employers: Your COIDA Return of Earnings Deadline is 30 June 2024
Close-up Of Businesswoman With White Bandage Hand Filling Work Injury Claim Form On Wooden Desk

Employers: Your COIDA Return of Earnings Deadline is 30 June 2024

“The Compensation Fund is mandated to provide social security to the injured-on-duty employees and those who contracted diseases at the workplace.” (Compensation Fund Annual Report 2021/2022)

By law, all employers are compelled to register for COIDA (Compensation for Occupational Injuries and Diseases Act No. 130 of 1993) within 7 days of employing their first employee.

COIDA provides for compensation for disablement caused by occupational injuries or diseases sustained or contracted by employees during the course of their employment, or for death resulting from such injuries or diseases, in which case the dependents can claim compensation.

Without this ‘insurance’, employers are held liable for the costs of an injured employee’s medical treatment and are also open to civil claims in respect of medical costs and compensation for loss of earnings, permanent disablement, death and even pension payments.

In addition, failure to comply with the provisions of COIDA constitutes a criminal offense. On the other hand, employers that meet the requirements and have paid the assessment fees can request a Letter of Good Standing (LOGS), a document often required when tendering for substantial projects or new business.

To access this ‘insurance’ for their employees, employers are required to register and contribute a fee to the Compensation Fund (CF) each year. In doing so, employers must also submit a Return of Earnings (ROE) every year.

The ROE is a declaration of employees’ earnings for the past year, made by the employer to the Compensation Fund, and the ROE for the 2023 assessment period is now due at the end of June for all employers.

What must be done
  • Register with the Compensation Fund, if not yet registered. The 12-digit CF registration number starting with 99 is required for submissions and payments.
  • Prepare the required information to be submitted for the 2023 assessment period, which extended from 1 March 2023 to 29 February 2024.
    • Earnings to be included in the declaration are regular overtime, regular bonusses (e.g. annual bonusses), cash value of fringe benefits and earnings or drawings paid to working company directors or members of close corporations.
    • For each month, actual earnings for the period, and head count including directors and members.
    • Projected earnings and head count for the year ahead.
  • Submit the Return of Earnings (ROE), also known as the 2A Form (W.As.8), as well as the list of required supporting documents, within the deadline.
  • Make sure the correct nature of business or assessment tariff subclass is used.
    • There are more than a hundred subclasses, each with its own assessment tariff based on the risks associated with the type of work.
    • The annual assessment fee is calculated with the relevant assessment tariff and on workers’ earnings. (Formula Assessment Fee = total workers’ pay ÷ 100 x assessment tariff)
    • In addition, if an employer’s accident costs are higher than others in the same subclass, the assessment tariff may be increased. If costs are lower, the rate may be reduced.
  • Ensure a Notice of Assessment/Invoice (W.As.6) is received, showing the amount owing to the Compensation Commissioner based on the salary information contained in the ROE and the correct assessment tariff.
  • Pay the COIDA invoice by the due date.
  • Report any accidents or incidents at work timeously.
  • Practice meticulous record-keeping.
  • Inform the Compensation Fund of any changes to the business, including when a business ceases to exist, within the timeframe allowed.
What are the deadlines?
  • 30 June 2024: Return of Earnings (ROE) submission.
  • 30 days from the invoice date: payment of the COIDA invoice.
  • Within 7 days: Report any changes to the business to the Compensation Fund.
What are the consequences of non-compliance?
  • A penalty of 10% will be charged on returns submitted late.
  • Interest will be charged on accounts after 30 days from the invoice date.
  • Employers facing payment challenges can request an instalment plan.
  • If no return is submitted, the employer may be assessed on the basis of estimated earnings; and may receive a fine of up to 10% of the amount so assessed.
  • Inaccurate information and discrepancies can trigger an assessment revision or even an audit, both of which are time-consuming and costly to resolve.
  • The Compensation Fund has warned employers to expect an increase in employer engagements, site visits and audits.
How to maintain compliance

Understanding and adhering to the COIDA regulations is a fundamental employer responsibility we are able to assist you with, professionally and within the deadlines, ensuring your employees enjoy the cover provided by COIDA, while protecting your business from the risks of non-compliance.

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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Your Tax Deadlines for June 2024

  • 07 June – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 June – Value-Added Tax (VAT) manual submissions and payments
  • 27 June – Excise Duty payments
  • 28 June – Corporate Income Tax (CIT) Provisional Tax payments
  • 28 June – End of the 1st fiscal quarter
  • 28 June – 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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Read more about the article Your Employer Annual Declaration is Due by 31 May
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Your Employer Annual Declaration is Due by 31 May

“Failure by an employer to comply with its obligations does not only harm that employer and the fiscus, but also employees. SARS vigorously pursues employers that fail to comply.” (SARS)

Employers must submit their annual reconciliation declarations (EMP501) with accurate and up-to-date payroll information about their employees by 31 May this year.

This is among the requirements imposed on employers by the Fourth Schedule to the Income Tax Act:

  • deducting or withholding employees’ tax from remuneration,
  • paying the above to SARS monthly before the 7th of the following month,
  • reconciling employees’ tax during the annual and the interim reconciliation, and
  • issuing tax certificates (IRP5s/IT3(a)s) to employees timeously.
A SARS focus area

The employer-reconciliation process is a focus area for SARS, not only to ensure compliance among employers, but also because it enables SARS to issue individuals with income tax auto-assessments.

SARS uses the IRP5/IT3(a) certificate information submitted by employers through the annual reconciliation process to prepopulate the employees’ annual income tax returns (ITR12), and employees cannot change this information.

This means the employer-reconciliation process is also a key phase in the Income Tax Filing Season, because incomplete or incorrect information will make it difficult for employees to fulfil their tax obligations and because employees require IRP5 and IT3 certificates to file their income tax returns in time during tax season.

As such, SARS says it vigorously pursues employers that fail to comply and, where necessary, aims to make tax non-compliance hard and costly through hard enforcement, for example, court action, asset seizure and criminal prosecution.

What needs to be done?
  • Register employees who are not registered for income tax.
  • Review the year’s EMP201 declarations that declare the total tax liability for each tax period for:
    • Employees’ Pay-As-You-Earn (PAYE) tax,
    • Unemployment Insurance Fund contributions (UIF),
    • Skills Development Levy (SDL)
    • Employment Tax Incentive (ETI) amounts (if applicable).
  • Submit any outstanding monthly declarations (EMP201) and settle all payments due to avoid administrative penalties for non-compliance or late submission, and to reduce interest charges on delayed or outstanding amounts.
  • Ensure the values on the EMP201 declarations and on the tax certificates balance to the actual payments made to SARS.
  • If any discrepancies are identified in the EMP201 declarations, these must be corrected when submitting the EMP501.
  • The EMP501 Annual Reconciliation Declarations must include:
    • Monthly employer declarations (EMP201).
    • Information about payments made (excluding penalties and interest paid).
    • Employee tax certificates (IRP5/IT3(a) generated) covering the tax year from 1 March 2023 to 29 February 2024.
  • Monitor the status of your submission to ensure the EMP501 has been successfully filed with SARS – a submission rejected as incomplete or due to a data error is considered not to have been submitted, and the taxpayer will be liable for non-compliance penalties.
  • Keep accessible employer records with a register that contains each employee’s personal details and financial records as prescribed by the Commissioner for at least five years.
  • Also complete the interim reconciliation process in September/October each year to enable an easier and more accurate annual reconciliation submission and an up-to-date employee database.
Consequences of non-compliance
  • ETI refunds (unused ETI amounts) can only be claimed by submitting interim and annual reconciliations (EMP501s). Failure to do so will result in ETI refunds being forfeited.
  • Submitting an incomplete EMP501 or submitting an EMP501 after the due date will result in administrative penalties, amounting to 1% of the year’s PAYE liability. This penalty increases by 1% monthly, reaching up to 10% of the year’s PAYE liability. A penalty assessment notice (EMP301) will be issued. It is possible to incur two penalties for the same period i.e. both a PAYE late payment penalty and PAYE administrative penalties.
  • In addition, it is a criminal offence for an employer wilfully or negligently to:
    • Fail to submit full and complete EMP201 or EMP501 returns to SARS by the due date.
    • Fail to issue an IRP5 or IT3(a) certificate to an employee within the specified periods.
    • Fail to deduct or withhold PAYE or UIF, or not to pay any PAYE or UIF deducted or withheld over to SARS as required by law.
    • Use or apply PAYE deducted or withheld for any purpose other than to pay that amount to SARS.

Any person found guilty of one of these offences is liable, on conviction, to a fine or imprisonment for up to two years.

We can help!

Let us help you review your employees’ tax obligations and prepare for submission of the Annual Reconciliation Declaration. Similarly, if penalties and interest have already been imposed on your business, we can assist in requesting remission from 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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How and When to Save a Struggling Start-Up

“Failure is simply the opportunity to begin again, this time more intelligently.”- (Henry Ford, founder of Ford Motor Company)

Data from StatsSA has shown that more than 1,500 businesses closed their doors for good in South Africa last year. This can come as no surprise to anyone who conducts business in South Africa at the moment, with spiralling costs, high interest rates and other tough market conditions that include frequent load shedding at short notice.

It is therefore highly likely that all business leaders will go through tough times and for those with start-ups they can often seem insurmountable. If your start-up is one of those failing businesses the first thing you need to do is determine if the company is worth the extra energy, investment and effort required to save it, and if the answer is yes, then take our steps below to ensure that happens.

Save or close?

The first step to deciding whether to save a company is to work out the root cause of the troubles. Often this will take a team of outsiders, but a conversation with us as your accountants should be the first step. We can help you quickly assess whether your troubles come from external issues such as competition, market conditions or new regulations, or whether they are from internal issues such as poor management, a high level of debt, bad hires or inadequate equipment.

Next you need to be brutally honest with yourself. What was it that made you enter the market? What made you unique? Are these things still true? Is your product obsolete? And is your business still capable of turning a profit? Assuming you believe profit is still achievable, then the next step is a full evaluation of the finances, from assets to debits and invoices outstanding, so you can find out just how bad things are.

From there, we can help you work out the costs of necessary adjustments. Do you need restructuring? New equipment? Or new staff? What will it cost to fix, and do you have the ability to go through the necessary changes? You will need to carefully consider all these steps. You have invested a lot of effort and emotion into this company, and making these decisions rationally can therefore be hard. Having brought advisors onboard, you now need to actually listen to what they have to say.

If you have completed all the steps before this and still want to go on, then ask yourself one final question. Are there alternatives? Is there anyone who would buy the company? A competitor who might consider a merger? And why would one of these options not be better than you keeping things going? It is important to consider all of these options, so that when you commit you know you are on the right path. If, after all of this, you are still determined to save the business, here is what you need to do:

  • Rank your challenges
    Being in a start-up can be overwhelming. It’s likely you have more than one challenge that’s driving your company into distress, and you may not know where to begin. Your first step should be ranking your challenges. Which of your challenges are the most dire? Is debt getting on top of you each month? Is someone stealing from your inventory and causing you a loss? By ranking your difficulties, you can see which are the most urgent fixes and can tackle them in order, knowing that each tick on the list is a step closer to saving the company. Fixing everything, starts with fixing one thing.
  • Consolidate debts
    Debt consolidation or restructuring can help your company save a great deal simply by lowering the interest payable each month. By consolidating debts into one loan or restructuring loans with different interest terms you can both pay them off quicker and save on the monthly expenses.
  • Find the funding
    Whether your challenge is a lack of advertising, a glut of debt or broken equipment, the answer is often funding. Whether you need to sell a percentage of the business, withdraw money from your own savings, take a loan or beg for money from friends and family, addressing the lack of funding and attending to these challenges is a necessary step. We can help you determine the best way to use the funds you have to make the biggest impact.
  • Re-evaluate your business plan
    Take a look at your business blueprint and particularly your projections for the future. Now, contrast it with the present state of affairs. Which projections did you get right, and which failed? Why? Has there been less demand than expected? Did your marketing team maybe direct their efforts at the wrong audience? What has your customer retention been like? Which expansion opportunities did you miss, and where did you stray from the original plan? Regardless of the root cause, it’s now time to sit down with the experts and brainstorm a solution or a substitute that can fix these issues.
  • Maximise your staffing
    It’s an old and much-repeated adage for a reason, “A company’s best asset is its staff”. Take a look at your staffing and truly analyse whether the people involved are the right fit for their roles. Do they all have the training necessary to do their jobs to the best of their ability, and are they motivated to do so?Depending on the size of your staff it may help to meet with each employee, to ask them what they need and what they think is missing. Often employees may offer insights that can be missed at the top level. Making sure everyone is given the skills they need, feels valued and understands their role will be essential if you want to save your company.

    Just as important is making sure that those who are hired by your business are all offering value. If your company is struggling, then it is not the time to keep someone on who cannot perform or be retrained to fill a more beneficial role. Many roles these days can be outsourced to freelancers where you only pay for the work that is done. Carefully consider which roles may benefit from this.

  • Overhaul your sales techniques
    Many business leaders have underestimated the extent to which the sales process has changed over the past few years. There are a lot of new ways of engaging with customers and making new connections, and these should all be actively utilised if you want to be successful.From social media to remote selling and data-driven sales, there are new ways to get the most from your sales professionals. Customer Relationship Management (CRM) systems allow your staff to track and analyse customer behaviour, better targeting the client’s needs. If your competition is making the most of these sorts of strategies and you are not, then it’s time to rethink the way you close the deal.
Don’t give up

Turning around a business can be emotionally draining and thankless work. Now that you have done the evaluation and committed to fixing things, this is not the time to give up. Each time you tick off one of your list of challenges is a step closer to success, and as Steve Jobs always said, “I’m convinced that about half of what separates successful entrepreneurs from the non-successful ones is pure perseverance.”

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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Beneficial Ownership Registers – Now Mandatory with CIPC Annual Returns

“It is imperative that ALL companies and close corporations ensure compliance with the beneficial ownership filing requirements, to ensure good corporate governance and business continuity.” (CIPC)

Following changes to the Companies Act on 24 May 2023, company directors and members of close corporations are obliged to lodge and maintain a detailed Beneficial Ownership (BO) Register, along with a list of supporting documents with the CIPC (Companies and Intellectual Property Commission). This register and documents must also be kept up to date within tight timelines and verified annually.

Pre-existing companies with their anniversary date after the promulgation of the amended Companies Regulations were required to file their beneficial ownership information with their annual returns. Registers for new companies and amendments must be lodged within 10 days. This means that all entities in CIPC’s register must have filed their beneficial ownership information by 24 May 2024 – one year since it became mandatory.

The Commission, citing a huge number of non-compliant entities that are yet to file their beneficial ownership and/or securities register information, is enforcing compliance by implementing more serious consequences.

Consequences of non-compliance  
  • A new “hard-stop functionality” has been implemented by the Commission. That will prevent any non-compliant entities from filing their annual returns, which brings its own consequences.
    • The late filing of annual returns will incur penalties.
    • Banks, service providers or customers often require businesses to have up-to-date annual returns before engaging in business.
  • The Commission will take further and necessary enforcement actions with regards to entities which continue to be non-compliant, such as:
    • investigation into the administration and governance processes of non-compliant business,
    • issuing of compliance notices; and/or
    • referral for deregistration and even final deregistration due to non-compliance.
  • It is also a criminal offence to submit false or incorrect information to the CIPC.
What is required for compliance? 
  • Identify the beneficial owners of a company – these are individuals/natural persons who, directly or indirectly, ultimately own 5% or more of the company, or exercise effective control of that particular company.
  • For each beneficial owner identified, collect the following:
    • full names, date of birth, correctly certified copy of ID or passport;
    • business or residential and postal address;
    • email address;
    • confirmation as to the participation and extent of the beneficial interest;
    • supporting documents.
  • Collate the information in a register, which must be filed with CIPC, and upload the supporting documents to CIPC’s website.
  • Keep the register up to date, with changes filed with CIPC as soon as practically possible, but no later than 10 business days after notification.
  • An updated register must also be submitted with the annual returns each year.
  • The information must be treated as confidential and adequate precautions must be taken to prevent theft, loss, damage, destruction and falsification.
Top tip for hassle-free compliance

Our assistance will prove invaluable in ensuring your business remains compliant with both CIPC’s beneficial ownership requirements and annual return requirements, particularly following the hacking of the CIPC website and the problems and delays that followed.

We can also guide you through the complexities of CIPC compliance, manage the tedious processes and take care of the ongoing maintenance requirements, thereby eliminating your risk of non-compliance, which constitutes an offence and can incur administrative penalties.

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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Read more about the article Five Things You Need to do After the CIPC Hack
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Five Things You Need to do After the CIPC Hack

“The Internet is a worldwide platform for sharing information. It is a community of common interests. No country is immune to such global challenges as cybercrime, hacking, and invasion of privacy” – (Lu Wei, the head of the General Office of the Central Leading Group for Internet Security and Informatization from August 2013 to June 2016)

On the 1st of March 2024, the CIPC admitted it had been hacked. The CIPC said in a statement that, “Our ICT technicians were alerted, due to extensive firewall and data protection systems in place at the CIPC, to a possible security compromise and as a result, certain CIPC systems were shut down immediately to mitigate any possible damage.”

While they referred to the incident as “an attempt” to hack their systems they also added, “Unfortunately, certain personal information of our clients and CIPC employees was unlawfully accessed and exposed.”

A few days later MyBroadband.co.za said they had been contacted by the hackers who allegedly proved they had access to the site since 2021 and the CIPC could be understating the damage done. Whether the claims made to MyBroadband are accurate or not, the possibility this hack has leaked private information from many or all of South Africa’s registered businesses and presumably given outside access to company registrations which potentially allows the hackers to make alterations to core business areas.

Together with a long-standing issue at SARS that periodically sees clients receiving an email or SMS stating, “unauthorised changes were made to your personal details on eFiling”, it is clear that South African businesses need to be aware of the risks of online attacks at key government organisations and more importantly, know what to do about them.

These are the main concerns:

Private information leaked

According to reports, the hackers may have gained access to the private credit card information used to make payments to the CIPC. MyBroadband quotes the alleged hackers as saying the CIPC was “processing and storing credit cards in the clear.” While most banks require access to an app as verification, the exposure of CVVs and expiry dates of cards is a risky proposition. When combined with other information stored on the site, such as the names, addresses and signatures of directors there is a real risk that company clients and contacts may be open to being scammed through fake profiles or other contacts generated by malicious third parties.

Access to Company registrations

If, as is alleged, hackers have gained unfettered access to the company registrations section and the login details for multiple clients, companies risk potential changes in their core information. Directors can be changed, addresses altered and critically, key documentation can be downloaded.

The latter is of great concern as these documents could allow a fraudster to open bank accounts in a company’s name. After that it becomes simple to contact clients saying that bank account details have changed, and even offer them the proof that they are speaking to legitimate company representatives. From there money could easily be siphoned into these phoney accounts and it may take weeks or even months to uncover.

What should you do?

With every company vulnerable it’s critical to take a number of steps immediately to mitigate the risk and potential damage.

  1. Check bank accounts and cards
    Monitor your bank account and card transactions even more closely than before for any signs of suspicious activity. If any unusual activity does occur, report the incident to the bank immediately and consider cancelling any bank cards that may have been exposed on the CIPC website and ordering new ones.
  2. Warn your clients
    You may want to consider adding a warning to emails and client correspondence that asks them to treat any notices supposedly from your business of changes to bank account or personal details with caution due to the CIPC hack and SARS login leaks. The warning should carry the caveat that should they receive any bank detail change correspondence they should check with you directly before making alterations to payments.
  3. Change your usernames and passwords
    Change all login details. Assume your current passwords have been compromised and check whether you have used them on other sites as well. Even if this is not the case, it’s wise to change all your important passwords periodically, particularly those for bank accounts or other financial institutions.
  4. Warn your employees
    Alert all employees that any emails, calls or other communication from banks, insurers or fraud divisions should be treated as suspect. Instruct your employees to authenticate communications directly with those departments immediately (using contact details they know to be genuine) rather than give away any information to an unverified person. This is good practice anyway in light of surging cyberfraud generally, but the CIPC hack makes it essential.
  5. Remain vigilant
    We as your accountants are happy to help advise you on how to monitor the credit bureaus and banks to track any illegal accounts, which may be opened in your name and discover suspicious changes in the invoicing and payments. A client who usually pays regularly suddenly stopping is now cause for an immediate follow-up.

Don’t stop being cautious. These sorts of hacks can often come back to haunt a company months after they happen. Assume you will need to be careful for at least a year as the hackers work their way through their haul and try to make the most of it.

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.

© CA(SA)DotNews

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Your Tax Deadlines for May 2024

  • 07 May – PAYE submissions and payments
  • 24 May– Value-Added Tax (VAT) manual submissions and payments
  • 30 May – Excise duty payments
  • 31 May – VAT electronic submissions and payments, & Corporate Income Tax (CIT) Provisional Tax 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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Read more about the article Have Your Own Budget Shortfall? Here’s What to Do…
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Have Your Own Budget Shortfall? Here’s What to Do…

“The cold, harsh reality is that we have to balance the budget.” (Michael Bloomberg, former New York City Mayor)

Budget shortfalls are not uncommon across the public and private sectors, especially in these economically challenging times. A budget shortfall is a significant concern for any individual or organisation and should be corrected promptly.

To address the R15 billion shortfall in National Budget 2024, the South African government earlier this year did not cut its spending, but rather indirectly raised individual taxes by not adjusting personal tax brackets, rebates and credits for inflation, as well as proposing above-inflation increases in sin taxes.

Of course, these strategies are not available to South African individuals and businesses, but nevertheless, as Michael Bloomberg, former Mayor of New York City reminded us: “The cold, harsh reality is that we have to balance the budget.

This is because a budget shortfall – when financial obligations or liabilities exceed the amount of cash available – tends to impact negatively on business by, for example, necessitating spending cuts that could adversely affect critical operations, or by requiring an increase in debt to finance the shortfall.

On the other hand, maintaining a balanced budget ensures expenses do not exceed revenue, promoting financial stability and avoiding additional debt. By providing a clear demarcation of the available resources and financial capabilities, a balanced budget facilitates informed decisions, long-term planning and sustainable growth.

There are different types of budgets for various purposes, such as day-to-day operational budgets, cash flow budgets, long-term capital budgets, and master budgets combining various budget types for a comprehensive overview of the company’s overall financial health.

These budgets include elements such as revenue estimates; fixed, variable and one-time costs; cash flow projections; and profit projections. We are able to assist you with choosing the right approach for your business’ specific budgeting requirements.

Strategies for balancing your own business and personal budgets

If you are facing a budget shortfall, the tried and tested strategies below for balancing a budget may be helpful. While these approaches are business-orientated, each can be adapted to balance your personal budget too.

1. Understand your shortfall

Effective budget shortfall management begins with understanding the causes and consequences thereof. Do a thorough analysis before deciding which budget balancing strategies to implement.

For example, a shortfall can be temporary, perhaps the result of a specific set of circumstances, or it can be persistent, which might indicate poor financial management.  Your accountant will also be able to assist in this respect.

2. Spending cuts

This is the basic strategy for addressing budget shortfalls. However, cost-saving opportunities are not always easily found.

Some of the tactics to consider include, for example, cutting all non-essential expenses, across-the-board cuts, targeted cuts in specific areas, or even financial modelling or projections that calculate the combined impact of various approaches.

Not all cost-cutting measures are the same and it is more effective to prioritise cost cutting initiatives based on potential impact and feasibility. Prioritising high-impact initiatives can deliver quick wins, building momentum for further spending cuts.

3. Process optimisation

Unnecessary expenses in a business are often the result of inefficient processes, bottlenecks or redundancy. Eliminating these will not only streamline operations but will also cut waste and unnecessary expenses.

Process optimisation could involve re-organising workflows, automating processes, adopting lean management principles, or even outsourcing certain functions or utilising shared services.

4. Increase revenue

Depending on your business model, there are numerous strategies that may be considered to increase revenue, which could contribute to balancing the budget. These range from re-engaging your previous clients to upselling existing clients, to diversifying your products or services, bundling your offerings, or extending your geographic reach.

You might also consider partnering with other businesses or organisations, or embracing new technology, such as e-commerce, for generating additional income.

5. Short-term finance

Debt may also be a short-term solution but be sure to understand the immediate and long-term consequences, given your current and projected financial situation.

We can provide invaluable advice and assistance if you are considering this option.

6. Monitor, adjust and communicate

Your budgets should be monitored as an ongoing process, including regularly assessing their effectiveness, making necessary adjustments, and tracking progress.

Remember to involve your employees, suppliers and other stakeholders, who often have valuable insights into areas where budgets can be optimised. Communicate clearly about the financial situation and reasons for any budget adjustments, acknowledging the impact on the team and stakeholders, and providing opportunities for them to provide input and ideas to mitigate the impact on their activities.

Maintaining a balanced budget is crucial to financial stability and sustainable business growth. It empowers business owners and managers in understanding the company’s financial health, setting realistic goals, planning for contingencies, and capitalising on opportunities.

We can assist you to prepare a budget tailored specifically to your business, to monitor your team’s budget performance, and to make budget adjustments as required, setting your business up for both resilience and sustainable growth.

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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Read more about the article Price Your Products for Profit with these Psychological Strategies
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Price Your Products for Profit with these Psychological Strategies

“Find the right price for an irresistible offer, which, by the way, isn’t necessarily the lower price.” ― (W. Chan Kim, Business strategy advisor and author)       

A good businessperson pays attention to the price of their products. With accountants by their side, they wisely analyse every expense, tax and logistical possibility to ensure their product goes out at the best rate for maximum profitability. Like with everything in society, no matter how thorough the maths, pricing strategies can also be influenced by the underlying psychological principles that drive consumer behaviour and purchasing decisions.

Ultimately, customers want to know that they’re getting either the best price point, the best quality, or the best value. Psychological pricing leans into that idea, and ethically uses price as a way to send the right signals to make customers feel one of these three benefits.

By decoding these subtle nuances, businesses gain a competitive edge by subtly adjusting their pricing strategies to lure customers and bolster profitability. Here we uncover the strategies and insights essential for businesses aiming to thrive in today’s dynamic market landscape.

Price Appearance

All businesses know that pricing an object at R49.99 is more likely to attract a sale than simply pricing it at R50. In the West people read from the left so the lower number on the left is attractive. Of course, many customers know this too, but there are other ways of making the appearance of the price boost sales.

The first of these is simply to leave off the cents in a price. Studies have shown that marking a product as R49 is more likely to make a sale than R49.00 simply because it looks shorter. In fact, according to The New York Times, even putting the currency sign at the start of a price can trigger purchasers into feeling the “pain of paying.” The best route? Remove the currency sign and cents altogether.

Premium Pricing and Price Anchoring
  • Premium pricing is when a brand chooses to price themselves at the top of the market rather than set a competitive price. This can work due to the public’s long-established perception that higher prices equal higher quality or rarer products. This does not always work, but there is a far subtler way to take advantage of the same effect – price anchoring.
  • Price Anchoring is where a business releases their first product at a premium price but releases subsequent products at more competitive rates. The existence of the premium product makes the other products seem that much more reasonable than they otherwise would and encourages sales. Price anchoring can also refer to a practice in retail where the store puts an expensive product alongside a cheaper one, thereby making the cheaper one’s price seem like a bargain. For example, retailers, putting prime virgin olive oil at R89.99 for 500ml next to the sunflower oil, makes the latter seem cost-effective, even if they have priced it above the usual market price.
Discount language

Offering discounts is a great way to sell off stock that may be moving too slowly or to encourage people to try a new product for the first time, but did you know the words you use can influence how likely it is for people to take up those discounts? For instance, telling people they get 50% more of a product for the same price has been shown to be far more effective as a sales incentive than offering them 33% off. This is despite the fact that these are the exact same offer.

Then of course, there is the crafted discount offered by many large supermarkets these days. With the crafted discount you mark a product up significantly and then tell customers they can get the normal price if they buy two. For example: Bacon is usually R35 a packet, so mark it at R50 a packet and then offer the discount of “2 for R70”. Not every business owner will be comfortable with using this tactic without ensuring that the customer does in fact get some benefit (by offering “2 for R65” perhaps) but it certainly should boost sales.

Decoy Effect

Decoy pricing is a strategy companies use to convince clients that a slightly more expensive product is in fact the one offering the best value. It takes advantage of how buyers weigh price relative to the value they perceive. With decoy pricing the salesperson will offer clients products they know they will not take simply to guide them to the one they actually want to sell. For instance, they might be trying to sell you a car that’s a little out of your price range, but then say, “You are right, let’s look at this one which is in the price range you were looking for.” Of course, the new option is significantly lower quality, thereby highlighting the original car as the wiser purchase even if it is a little more expensive.

This gets even smarter when we take into account a psychological state known as the compromise effect, in which customers will gravitate toward the middle ground in any offer. If there are three choices for fibre connections with the fastest speeds being the most expensive, customers are more likely to take the medium speeds at the medium price. Some restaurants who know this make their second cheapest bottle of wine, the one with the highest mark up. Want to make your product seem better value? Simply offer the customer one that’s much more expensive and one that’s much cheaper as well.

Tiered pricing

Let’s say the product you want customers to buy is, in fact, the most expensive one. Then what you need is tiered pricing. This strategy lays the benefits of the highest priced product out in a way that makes it seem like a bargain compared with the others.

For example: Your lowest tier product has 3 features for R50, the middle tier has four features for R75, and the top tier has eight features for R100. In this case the middle product is a kind of decoy that could have been priced with one or two more features, but by giving the top tier product that sudden jump-up in feature numbers, the salesperson can be sure the client is much more likely to buy that.

We can help you formulate a pricing strategy tailored to your business model.

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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Freelancer vs Employee: How to Decide

“People are not your most important asset. The right people are.” (Jim Collins, author, speaker and consultant)

Knowing whether to hire a freelancer or full-time employee for any particular role is vital for the successful running of a modern business. With budgets constantly being constrained and the pressure to perform going up, ensuring you maximise your workforce is absolutely essential if you want to build a successful company.

Here is our quick guide to help you decide whether the roles in your company should be filled by a full-time employee or a freelancer.

When to bring on an employee
  • Training: If the role requires specific knowledge or a significant amount of training, it will always be better to bring in a full-time employee. While the risk always exists that you will train an employee only for them to leave, this risk is far greater with a freelancer given the fact that they are already working with multiple companies.
  • Oversight: If the role requires careful oversight, it is also a good idea to make it full-time. Freelancers work with multiple clients and as such schedule work to their calendar and not strictly to when your managers and supervisors are online.
  • Culture and brand awareness: Freelancers are exceptional at delivering on their specific tasks but may not have the same general awareness and knowledge of your company. This is important to consider especially when choosing staff who will be interacting with your clients and customers, where it’s vital they are living the company culture and fully cognizant of the nuances of the brand.
  • Recruiting a leader: Anyone who is set to take a senior role in your business should be a full-time employee, simply because these roles require someone who is fully dedicated to the business and not distracted by other roles and concerns.
When to bring on a freelancer
  • Budget: If the budget is a concern, then you should definitely be using a freelancer. Even if that freelancer is charging a premium your company will often save money on benefits such as health insurance, paid holidays, retirement annuities and bonuses, while also saving on their office space and supplies and equipment. With freelancers the company only pays for the hours worked, and dead time around the coffee machine is no longer an expense. If you find the job is larger than expected the option exists to take the freelancer on a retainer for a set number of hours each month at a set rate, which can activate even more savings. Your accountant can easily run the costs for you in each scenario, making this decision an easy one.
  • Risk: As freelancers aren’t employees, they are significantly easier to terminate should their work not be up to standard. Further, they aren’t generally considered when tallying the employee numbers for determining the size of a business, and their working conditions are not regulated by the Basic Conditions of Employment Act. In general, taking on a freelancer runs far lower risks for an organisation than hiring in a similar position. Beware however of tax and labour law rules on when a freelancer or “independent contractor” will be deemed to be a full-time employee no matter the terms of your contract – ask us for help in need.
  • Quality: For the freelancer in particular, quality reigns supreme. With their livelihoods dependant on repeat work and satisfied clients, freelancers must be the epitome of dedication and excellence in their craft. Unlike staff members whose performance might fluctuate, freelancers understand that their contracts are always up for renewal, driving them to consistently deliver their finest work.

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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Donating to a PBO? Check SARS’ New Requirements (and PBOs Note Your New 31 May Deadline)

“[The new requirements] enable… a more efficient process to make deductions available to qualifying donor taxpayers and to help prevent section 18A claims abuse.” (SARS)

Public benefit organisations (PBOs) are engaged in public benefit activities for example religious institutions, day care centres, disaster relief organisations, health clinics, etc.

Many are dependent on donations and, to encourage the public’s generosity, a tax deduction for certain donations made by taxpayers is provided.

Qualifying PBOs (i.e. section 18A-approved organisations) may issue tax certificates – called section 18A receipts – to donors.    This tax certificate – or section 18A receipt issued by a section 18A-approved organisation – entitles you or your company to a deduction from taxable income for bona fide donations in cash or of property.

While approved section 18A institutions were previously required to keep records of all section 18A receipts issued, the requirements have changed, affecting both PBOs and their private and corporate donors.

PBOs: New requirements, and a 31 May 2024 deadline

Previously, the information that had to be provided by a PBO for a valid section 18A certificate was limited to the details of the PBO; details of the date, amount or nature of the donation; confirmation of how the donation would be used; and the name and address of the donor.

Last year, SARS issued further requirements for more detailed information to be included on all section 18A certificates issued from 1 March 2023. This includes the nature of the donor; the donor’s identification or registration number; donor trading name (if different from the registered name); donor income tax reference number; donor contact number and e-mail address; and a unique receipt number.

In addition, this year – like other third parties such as the banks, medical schemes and fund administrators required by law to send data to SARS – all PBOs are now also required to submit bi-annual reports – called an IT3(d) – to SARS. The first deadline for PBOs in this respect is 31 May 2024.

From this date, approved section 18A tax exempt institutions must submit data on section 18A tax deductible receipts issued, which includes information on the S18A approved tax exempt institution, donation information and donor information for the 2023/2024 year of assessment (i.e. S18A receipts data from 01 March 2023 to 28 February 2024) by submission of IT3(d) data via efiling.

Professional assistance is essential

While it has always been best practice to check with your accountant first before making a donation and relying on the tax break, it is now more crucial than ever for companies and individuals to ensure that the PBO being supported, as well as the tax certificate – or section 18A receipt – issued to obtain a tax deduction, meet SARS’ new requirements. Also remember to check the limits: the amount of donations which may qualify for a tax deduction is limited to up to 10% of taxable income.

We can also help PBOs to ensure they can meet the new requirements and deadlines, to ensure compliance and that their donors can enjoy the tax breaks that will encourage generous giving.

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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Your Tax Deadlines for April 2024

  • 05 April – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 April – VAT manual submissions and payments
  • 29 April – Excise Duty payments
  • 30 April – 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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Budget 2024: How It Affects You and Your Business

“Our bigger challenge… is that our pie is not growing fast enough and this limits our ability to generate sufficient revenues to distribute among our priority areas.” (Finance Minister Enoch Godongwana – Budget 2024)

Finance Minister Enoch Godongwana’s third Budget Speech in an election year contained few surprises, but also little in the form of good news, especially for South Africa’s personal income tax payers.

The Minister quoted dismal local average expected real GDP growth of 0.6% for 2023, which is projected to reach 1.6% between 2024 and 2026. This poor economic performance is ascribed to the persistent constraints in electricity supply and freight, rail and ports, as well as a high sovereign credit risk.

And the result? A sharp drop in tax revenue collection for 2023/24 which, at R1.73 trillion, is R56.1 billion lower than estimated!

To make up the shortfall, Budget 2024 contains tax measures that will raise an additional R15 billion in 2024/2025, mainly through income tax raised by not adjusting personal tax brackets, rebates and medical tax credits for inflation, as well as above-inflation increases in alcohol and tobacco excise duties.

Other main proposals included no increase to the general fuel levy for 2024/25, a global tax on multinational companies in South Africa with an annual revenue exceeding €750 million and the R150 billion withdrawal from SA’s Gold and Foreign Exchange Contingency Reserve Account.

These announcements are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.

Budget proposals that will impact you
  • Addressing the Budget shortfall, personal income tax brackets are not adjusted for inflation – so individuals who received a salary increase this year are likely to pay more tax as they could fall into a higher tax bracket.
  • No inflation adjustments to the tax rebates.
  • Medical tax credits per month are not increased by inflation.
  • A one-year extension in the R350 Social Relief of Distress (SRD) grant and increases ranging from R20 to R100 per month in other social grants.
  • Above-inflation increases in the excise duties on alcohol and increases of between 4.7 and 8.2% on tobacco products. This means that the duty on:
    • a 340ml can of beer increases by 14c,
    • a 750ml bottle of wine goes up by 28c,
    • a 750ml bottle of fortified wine goes up by 47c,
    • a 750ml bottle of spirits will increase by R5.53,
    • a 23g cigar goes up by R9.51,
    • a pack of 20 cigarettes, rises by 97c,
    • vaping products increase to R3.04 per millilitre.
  • Two-pot retirement reform to be implemented on 1 September 2024, allowing individuals access to a portion of their retirement savings before their retirement date.
Budget proposals that will impact your business
  • A global minimum corporate tax will be implemented from 1 January 2024, with multinational corporations with an annual revenue exceeding €750 million subject to an effective tax rate of at least 15%, regardless of where their profits are located. This will broaden the corporate tax base, enabling more tax revenue collection without increasing existing corporate taxes for local businesses. This new tax is expected to increase corporate tax collection by R8 billion in the 2026 tax year.
  • An increase in the limit for renewable energy projects that can qualify for the carbon offsets regime, from 15 megawatts to 30 megawatts.
  • An electrical and hydrogen-powered vehicle tax incentive introduced for manufacturers in 2026, enabling them to claim 150% of qualifying investment spending.
  • An increase in the carbon tax from R159 to R190 per tonne of CO2 equivalent from 1 January 2024.
Budget proposals that will impact all
  • The general fuel levy and the Road Accident Fund levy will not be increased this year, providing tax relief of R4 billion.
  • However, the carbon fuel levy will increase to 11c per litre for petrol and 14c per litre for diesel effective from 3 April 2024.
  • Plastic bag levy to increase to 32c per bag from 1 April 2024.
  • The R150 billion withdrawal from SA’s Gold and Foreign Exchange Contingency Reserve Account to pay down government debt.
How best to manage your taxes going forward?

In addition to the announcements detailed above, other technical amendments proposed in the Budget 2024 may also require professional tax advice.

Furthermore, as tax collection remains government’s main source of income, you would be well-advised to rely on our expertise and advice as we determine the impact of the Budget 2024 announcements on your tax affairs.

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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Budget 2024: Your Tax Tables and Tax Calculator

Budget 2024 effectively brought an increase in personal income tax by not adjusting the tables for tax rates, rebates and medical tax credits, while also implementing substantial increases in ‘sin’ taxes and introducing a proposed global tax on multinational companies.

This selection of official SARS Tax Tables and other useful resources will help clarify your tax position for the new tax year. Then follow the link to Fin 24’s Budget Calculator (just follow the four-step process) to perform your own calculation.


Individual taxpayers – tax tables unchanged

Source: SARS

Source: SARS

Source: SARS

Businesses – Corporate tax rates – extended

Sources: SARS’ Budget Tax Guide 2024Budget Speech 2024

Sin taxes increased

Source: Budget 2024 People’s Guide


How much will you be paying in income, petrol and sin taxes?

Use Fin 24’s four-step Budget Calculator here to find out the monthly and annual impact on your income tax, as well as what you will pay in future in terms of fuel and sin taxes, bearing in mind that the best way to fully understand the impact of the announcements in Budget 2024 on your own and your business affairs is to reach out to us for professional advice.

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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Read more about the article Things to Look for When Buying a Small Business
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Things to Look for When Buying a Small Business

“It’s far better to buy a wonderful company at a fair price, than a fair company at a wonderful price.”- (Warren Buffett, investor, businessman and philanthropist)

When buying a small business there are a number of things that need to be checked before pulling the trigger and signing the contract. Doing proper due diligence will ensure you don’t invest hard earned money on a lemon. Here are the five most important things to look out for.

• Finances

Carefully examining the finances of the company is vital and bringing an expert on board to do it for you will ensure you don’t miss those hidden details that could be signs of a faltering company. Let us examine your past financial statements and tax returns for you to discover trends and establish whether sales are on the way up or down.

We will also look closely at the assets and liabilities of your company, review the status of any inventory, equipment, and physical assets and analyse your likely costing for maintenance, necessary upgrades and stock issues. This is all essential as buying a company and then finding yourself in an immediate cash flow crisis is the worst possible start to your hopeful new venture.

• Intellectual Property

Does the company you are buying depend on one invention or many? If so, have those inventions been patented, copyrighted or trademarked? And just who owns those things? It’s no good buying a business only to find you now owe the former owners for the rights to using their creations.

• Customer opinions

The first step is to examine the internet for reviews. Perhaps the previous owners have been rude and undermined any goodwill that should have arisen from an otherwise excellent concept? Maybe the much-vaunted invention isn’t quite as good as expected?

Speak to key customers and ask them their opinion on a takeover. Does it bother them or will they stay on with the company when it has been sold? Does the goodwill of the business rest with the product and the business itself or is it personal to the current owners?

• Employees

Where possible conduct employee interviews to fully understand what they think of the company, how they believe it can be improved and whether they are planning on staying on if there is a new owner. The employees may be able to spot gaps or weaknesses you may not easily see, but more importantly may also reveal undiscovered areas for expansion.

A full employee analysis will, with the help of your accountant, also help you determine just where there are gaps that need to be filled, what training still needs to be done, and most importantly, what all of that will cost.

• Existing contracts

Take a look at any long-term existing contracts. Anything from a rental agreement to a customer service contract could reveal problems. Are there any burdensome terms and conditions that you will be locked into? Is there a customer who has to be serviced at an impossible rate, or a landlord who is expecting ten years of rent before you can move your headquarters? What are the costs of exiting these contracts, and can you afford them if necessary?

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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Read more about the article The Five Skills Your Business Needs to Cultivate in 2024
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The Five Skills Your Business Needs to Cultivate in 2024

“The only thing worse than training your employees and having them leave is not training them and having them stay.” – (Henry Ford, Founder, Ford Motor Company)

In a world where everything seems more expensive today than it was yesterday training and advancement of staff can seem of lesser importance. As an increasing number of studies show, however, this could not be further from the truth. A lack of training at businesses can lead to decreasing quality of service, high employee churn rates, and more recently, an inability to match more technologically savvy competitors in the market.

In 2024, speak to your accountant to budget for the advancement of your employees and the development of skills within your organisation. Businesses who fail to bring these skills on board, whether through training or additional hires, are guaranteeing tough times ahead.

1. AI Prompting

Like Excel in the 2000s this is the one skill every office employee will need to have over the coming years. At the moment, prompt engineers are commanding enormous salaries for their understanding of just which commands are genuinely helpful when dealing with AI. It’s all very well having the latest technology, but if you are unable to unlock its potential then you are wasting the investment and falling behind every day.

2. Creative Communication

Ironically, in an era where AI is capable of producing a facsimile of good writing in a matter of minutes, genuine heartfelt, creative and original communication is going to become even more critical. Ensuring you have employees who are capable of identifying communication opportunities, and actively translating the insights of AI into easily understood, actionable and motivational text will be the difference in a world littered with paint-by-numbers ChatGPT blog posts and internal emails.

3. Cybersecurity

As the world moves increasingly digital and automated it also becomes more vulnerable to cyber-attacks. Online threats can cripple companies and put them out of commission for weeks if not months, and lost information can be very hard to retrieve. While it is imperative that your company has experts employed who understand the threats, each and every employee should also be trained in the basics and potential loopholes that criminals will exploit. Failing to train in this area will no doubt lead to far greater costs down the line.

4. People Management

Managing a team requires a completely different set of skills to just ten years ago. With most jobs incorporating at least a percentage of remote work, and freelancers becoming an integral part of projects, managers need to be up to date on a number of new communication and management apps and solutions. Additionally, they need to know how to motivate and communicate effectively online and develop teams from people located around the world.

5. Customer Service

In the modern era of online reviews and social media, customer service has never been more important. Now, one bad experience doesn’t disappear, but instead lives with a company online forever. As a result, it’s critical that staff be trained in how to keep customers happy, how to handle a disgruntled customer and, when the odd bad reviews inevitably come in, how to turn them around to the company’s advantage.

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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Your Tax Deadlines for March 2024

  • 07 March – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 25 March – VAT manual submissions and payments
  • 27 March – Excise duty payments
  • 28 March – End of the 2023/24 Financial year, 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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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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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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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
  1.  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.
  2. 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.
  3. 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.
  4. 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.
  5. 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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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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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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Read more about the article 2024: Best Year Yet for Your Business?
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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 –

  1. The business’ past performance,
  2. Its current status, and
  3. 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.
  • 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 operationssuccesses 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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Read more about the article How to Survive Ongoing High Interest Rates in 2024
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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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Read more about the article How to Achieve Tax Compliance Throughout 2024
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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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Read more about the article Why January is the Perfect Time to Start a Business
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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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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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Read more about the article Corporate Gifting: How to Boost Your Business This Festive Season
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Corporate Gifting: How to Boost Your Business This Festive Season

“A real gift comes attached with ribbons, not strings.” (Raymond C Nolan)

Most clients, suppliers and business associates will appreciate a thoughtful gift from your company, and the Festive Season is the most appropriate time to send such a gift.

The challenge lies in selecting a gift that conveys genuine intentions to thank the recipients for the role they play in the success of your business, to strengthen the relationship and to stand out from the competition.

Here are some great tips to ensure your corporate gifts achieve these objectives.

  • Keep it simple: Choose gifts that are relevant and useful to the recipient, and also align with your business values and goals, for example, sending locally sourced gifts made and packaged with sustainable materials.
  • Stick to the popular choices: For good reason, certain gifts are most popular among recipients – with gift baskets, food and gift cards the most popular choices, along with handy tech gifts like portable speakers, headphones and tablets.
  • Allow a choice: Gift cards and vouchers are particularly popular because recipients can choose their own gifts.
  • Edible gift baskets: Gift baskets filled with delicious treats are very popular, because they can be shared with others. Chocolates and baked goodies like brownies are the favourites.
  • Don’t send these items: Avoid gifts like candles, soaps or magazine subscriptions, useless trinkets, office supplies, keychains, magnets and t-shirts.
  • Avoid over- and under-spending: A corporate gift does not have to be expensive, but it should be thoughtful and useful, as well as durable and long-lasting. Rather send great gifts to a few top clients, than worthless trinkets to all your business associates.
  • Presentation: The gift should be attractively packaged, with a personalised note or card included.
  • Personalise: Gifts that are specific to a certain industry, or – even better – to a particular client, will be much more appreciated. Customised products and personalised gifts are also gaining popularity.
  • Avoid in-your-face advertising: While part of a company’s marketing strategy, corporate gifts should come across as tokens of appreciation, not merely as billboards for your company’s advertising. Gifts should be branded with your company name, logo and contact details, but keep it elegant, professional and low key.
  • Experiences: Recipients may prefer experiences to things, for example, tickets to sporting events, theatre performances or even spa treatments, but be sure to allow a choice, unless you know the recipients’ preferences.
  • Host an end of year party: Another example of gifting an experience is hosting a party (a “Christmas party” if that terminology is appropriate to your guests) to thank business associates, creating an opportunity to get to know each other better.
  • Send an office lunch party: A favourite food gift is one sourced from well-known local establishments in quantities that can feed the whole office.
  • Charitable donations: A donation made to a charitable organisation on behalf of a client or supplier can also make a thoughtful corporate gift but allow the recipient to select the cause.
Mind the tax implications

Gifts could be tax deductible as marketing expenses or as cost of sales expenses, but the onus will rest on your business to prove that these expenses were incurred “in the production of income”.

When hosting an end-of-year or Christmas function for clients, expenses such as the venue, meals and entertainment can be claimed as a tax deduction, if your company can prove that expenses were incurred in pursuit of business. Check with your accountant that you will meet all the criteria before you rely on this tax deduction.

Similarly, before making a donation, ask your accountant if it will attract donations tax, which will be payable in the month following the donation date. Only donations made to a registered PBO (Public Benefit Organisation) approved by SARS are not subject to donations tax.

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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Read more about the article Festive Season Gifts for Employees? Here’s How SARS Will Tax Them
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Festive Season Gifts for Employees? Here’s How SARS Will Tax Them

“Think of giving not as a duty but as a privilege.” (John D. Rockefeller Jr.)

Most businesses want to show appreciation to their employees at the end of a long year’s work, and the “Season of Giving” is the ideal time. A thoughtful gift will make any employee feel more recognised and appreciated, and this will improve morale and enhance perceptions about the company and could even increase employee satisfaction and loyalty.

SARS, however, considers almost any kind of gift to employees as a taxable fringe benefit, and therefore companies need to check with their accountants before giving, to ensure the tax implications are fully understood and taken into consideration.

What does SARS regard as gifts?

Any asset, commodity, goods or property of any nature provided by the employer to the employee at no cost, or a cost which is less than the market value of that item, is regarded as a taxable benefit in the hands of the employee, as per Paragraph 2(a) of the Seventh Schedule to the Income Tax Act.

This means that any gift that can be regarded as an asset will be subject to employees’ tax – whether physical or intangible, and regardless of the value, because there is also no minimum value below which gifts from an employer are exempt from tax.

Furthermore, the gift will be taxable even if the gift is given to an employee’s family member, such as a partner or a child.

Also remember that the onus of proof lies with your company should SARS challenge the tax treatment of any gifts to your employees.

Tax on common employee gifts

Tangible gifts, such as watches or electronic devices, will be taxed in the hands of the employee based on its market value, or on the cost to the employer.

Intangible gifts such as flights, bus tickets or accommodation are also considered as taxable benefits to the employee and the cost to the employer is the taxable amount.

Gift cards and vouchers are among the most popular gifts for employees, but beware!  These are taxed at the same rate as if it the employee received cash. In some cases, it may be better to gift cash instead of a card or voucher that would limit the employee to a single retailer or outlet.

Similarly, bonusses are taxed at the same rate as other remuneration. This means that the amount of the bonus will be added to an employee’s annual salary when the rate of tax payable for the year is determined. The danger here is that the bonus amount might push some employees into a higher tax bracket.

How must the tax be deducted?

Depending on the nature of the gift, employers will need to determine the cash equivalent, or the market value, or the cost to the company to calculate the employee tax that must be deducted.

This can be quite complex, for example, the value of a benefit where accommodation is provided depends on whether the company owns the property or rents it, as well as whether or not the employee pays towards the accommodation.

The taxable amount calculated must then be reflected as a fringe benefit on the employee’s payslip, and PAYE must be determined and deducted. The benefit must also be declared on the employee’s IRP5/IT3(a) certificate.

Some exceptions?

There may be some possible exceptions, for example, if a gift to an employee does not involve any cost to the employer or where the employee gifts are used for business purposes.

An end-of-year function – whether a lunch celebrating the year’s achievements, or a team-building experience with snacks and refreshments, or a Festive Season office party with employees and their partners – is also a great way to treat your team with a delicious meal and complimentary drinks in a fun and social setting. The food and drinks will be tax-deductible expenses, regarded as a non-taxable occasional meal.

Paid time off work may also be an option that does not have tax implications for the employee.

An employer could also make a donation on an employee’s behalf as a gift. If an employer agrees to process a donation to a S18A-approved organisation through its payroll, such a donation can reduce the employee’s PAYE liability.

Professional advice is vital!

Whichever way your company decides to gift your employees, check with your accountant first to ensure it is both tax compliant and tax efficient.

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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Read more about the article How to Write a One-Page Business Plan
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How to Write a One-Page Business Plan

“If you do not know where you are going, every road will get you nowhere.” (Henry A. Kissinger)

Creating a business plan is one of the most important processes when running a business. It is the roadmap for the success of any business and should include everything from cash flow planning to expansion strategies and the company’s mission statement. If you want to take out a loan a full-length plan is invaluable, but on a day-to-day basis these documents can be lengthy and difficult to access.

A one-page business plan is primarily a communication tool and is developed as a way to quickly summarise the key points of a business and its goals. It’s a great way to clearly define often complex issues in a simple manner and keep executives, partners or staff focused on the mission at hand. They are also a strong place to start when developing a full-length business plan and can help companies to pivot in changing times.

What should a one-page business plan include?

Your one-page business plan needs to include everything below, but resist going into the details. Keep each point to a few well focused sentences. Remove unnecessary words and adjectives.

  • A Brief Description
    The first thing to do is to simply describe the types of products and services that make up your business.
  • Customer Pain Points
    What problem are you solving for your customers? Why does your product or service exist? And why are these products or services better than those of your competitors? Avoid generalities and keep your answer focused.
  • Competitive Advantages
    This is where you look at the things that make you and your company perfect for your industry. What makes you stand out? Is it the team you have put together? Your business model or a unique invention?
  • Making Money
    This is the space for a three-point financial model. It should include your revenue sources, your company costs and the pricing strategy for your products. Again, avoid the specific amounts. This is not a budget. It simply points to where the money comes from and how it is spent in three sentences.
  • Marketing Plan
    How do you get your product to your customers and how do you tell people about your business? What are your main sources for attracting new business? This is just a high-level overview on how you go about marketing and making sales.
  • The Competition
    In one line only, describe each of your major competitors and what makes their business a success.
  • Your Co-workers
    This is your chance to look at the key figures you have hired to make your company a success. Who are the most important people and why are they important? This will help you to understand which of your employees should be earmarked for promotions or bonuses, and training.
  • Future Funding
    What are the major things you may need funding for over the next few years? Why do you foresee the need for money in these areas?
  • Your “Why”
    Why are you doing this? What do you hope to achieve from your company and what is the end goal? While this is not included in a normal business plan, in your one-pager it can help act as a motivation and remind you why everything else exists.

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.

© CA(SA)DotNews

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Read more about the article 9 Tips for Catching CV Liars
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9 Tips for Catching CV Liars

“No man has a good enough memory to be a successful liar” – Abraham Lincoln, President of the United States of America, 1861-1865

 In a recent survey conducted by StandOutCV more than 50% of Americans admitted to lying on their CV. It’s a staggering number, and something that is taking place in a country where jobs are plentiful and finding work easy.

Google searches on how to lie on a CV went up 48% in 2022 alone, and searches on how to fake a job reference went up 52% in the same time.

While there is no such research on South Africa, business owners would be cautioned that a similar number is almost certainly to be expected here simply due to the tough economic conditions. The National Qualifications Framework Amendment Act 2019 makes it illegal to lie about qualifications on your CV in South Africa under punishment of a jail sentence and applicants can be made to pay back their full salary. Despite this there are a number of other ways that applicants can lie, which are not punished (e.g: past salary, job titles, and responsibilities) and which are therefore likely to be significantly more common.

9 tips for employers

It’s clear that lying on a CV is everywhere, so how can you as the employer protect yourself from this seemingly common scourge? Here are our 9 tips on what to look for to catch liars cold.

  1. What do people lie about most?

    People lie on their CVs for many reasons. Some do it to avoid being stereotyped or simply to boost their egos, while others do it for far more nefarious reasons like earning a job they aren’t qualified for.

    Studies have shown that the most common areas where people lie are: 1: Education level 2: Exaggerated salary 3: Date discrepancies 4: Job titles 5: Fake references and 6: Name dropping.

    These are therefore the areas you need to focus on the most when trying to trip someone up in a lie.

  2. Look for telltale signs 

    Look for areas where people are not being specific. For example: Dates that go from year to year instead of month and year to month and year probably indicate there is something being hidden. Have they said they have a Bachelor’s degree from a specific university but not mentioned that it’s a Bachelor of Arts or Science? Look for skills that are listed but that don’t make sense for the claimed work history – why does this typist of eleven years have brick laying as their primary skill?

  3. Check LinkedIn and other online resources

    Candidates will happily tell lies in the shadows to one recruiter they don’t know, but will they tell those lies online where all their past colleagues can see them? Unlikely. The LinkedIn version of their CV is almost certainly much closer to the truth than anything you see on paper. Double check, check other Social Media profiles, and Google for any other online mentions of the candidate.

  4. Call the references

    These days it’s much more common for people to list their friends as their references and give you their telephone numbers, but this does not mean you shouldn’t check-up. Call and have a chat, ask questions – even if these references only guide you to areas you can interrogate in the interview, it has been worth it.

  5. I vs We

    Candidates who are lying or embellishing their CV will usually continue to do so in the interview. While the use of “I” instead of “We” is not instantly damning it can be very suspicious depending on the position claimed and business they were previously hired at. Work done for larger organisations is usually completed as part of a team and if someone is claiming they did it all alone there is a good chance they are embellishing their CV or may not even know what the role entails at all.

  6. Ask questions

    Interview questions can be subtly set to probe the areas above where you don’t feel entirely comfortable. For example, instead of simply accepting dates of employment, ask the applicant to tell you again when they worked for a given company – it’s possible they could forget dates for their first job, but the most recent one is unlikely.

    Don’t be afraid to ask specifics about job titles and co-workers either. If you can, research some names off the internet and ask the candidate if they knew them. Ask about their listed skills and ask how they came to be at the level they are. Often you will find they have listed skills they definitely don’t have.

  7. Look for hesitation

    People are going to be nervous in their job interview and this should always be taken into account, but they should also be able to answer simple questions about their work. “Where were your offices?” should be met with an immediate reply. This is not a trick question, anyone who worked at that company should be able to answer quickly. It may even put the honest candidates at ease. Hesitation on these sorts of questions, or vague responses should be treated with suspicion.

  8. Request tangible proof

    The final definitive answer if you suspect someone is lying is to simply request tangible proof. They say they got seven exemptions in matric, ask them to bring in a certificate. They say they have a degree? They should be proudly able to show you copies. If they have done a TED talk they probably have a YouTube video.

  9. Trust your gut

    The last thing you should do – trust your gut. Some studies conducted at the University of California in Berkeley examined people’s gut reactions after just a few seconds of interview. Surprisingly they found that these initial uncomfortable feelings were actually more accurate than when interviewers were told in advance that someone would be lying and were trying to play detective. Admittedly, none of these studies has been wholly conclusive, but if you have done your homework, and are finding an applicant ticks the boxes above, your gut reaction may be the thing you need to make the final call.

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.

© CA(SA)DotNews

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Your Tax Deadlines for December 2023

  • 7 December – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 28 December – Excise Duty payments
  • 29 December – End of 3rd Financial Quarter
  • 29 December – 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.

© CA(SA)DotNews

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Read more about the article Employee Incentives That Really Work for Small Businesses
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Employee Incentives That Really Work for Small Businesses

“Always treat your employees exactly as you want them to treat your best customers.” (Stephen R. Covey, author of The Seven Habits of Highly Effective People)

Small businesses often lose their talent to large companies simply because they can’t afford the kinds of salaries and incentives on offer at a global corporate. Keeping staff happy is, however, critical for business success. Here are five employee incentives that really work to keep your staff happy, effective and engaged.

1. Allow flexible time

In the modern world nothing is as precious as time and employers should not underestimate what this would mean for employee motivation. In a recent study on the 4-day work week 89% of all respondents said they would make sacrifices to work four days a week, and 54% said they would gladly work longer hours on the other four days.

It costs nothing to offer employees the opportunity to set their own hours, and work when they are able. It also gives them the ability to look after families, run errands and still meet their work obligations – something larger companies may not be able to do.

2. Profit sharing

Profit sharing is a bonus incentive scheme that effectively only kicks in when the company is profitable. Better yet, it provides personal incentive to employees to make the company as profitable as possible. By offering employees an equal share in the profit sharing regardless of their position you also create a strong sense of teamwork and bond them in a united cause.

3. Public recognition

A big positive of working in a small company is being able to see and know each employee as an individual. Genuine recognition of achievements is therefore possible – did someone go above and beyond, or make a personal sacrifice to make a deadline? Acknowledge it publicly, in front of everyone else.

In a recent survey, 92% of all employees say they are likely to repeat an action if they are recognised for it. Simple acknowledgement can be motivation enough, but if this is backed up with a real reward, like paid time off or a monetary bonus it can become even more effective.

4. Make the office more fun

Small companies can introduce flexibility in office protocols as well as work hours. Think about how you can make things more relaxed in a genuine and helpful way. Consider providing a room where people can bring their children to do their homework after school pick up or allow employees to bring pets in on one day a week. Is South Africa playing a cricket test match? Put it on in the break room. Let people have a say in which coffee and tea are available and always remember birthdays with a thoughtful gift.

5. Points-based incentives

A points-based incentive program allows employees to gather points and ultimately redeem them for rewards. You could develop a book of rewards your employees will genuinely enjoy from small things like free lunch and gift cards to theatre tickets, holidays, spa treatments, and cell phones.

These incentive programs offer two major benefits, firstly your employees get things they actually want instead of generic rewards creating more motivation and secondly, they allow you to closely tailor where, how and for what employees are rewarded. This means greater incentive can be given for things that move your business closer to its goals.

Ask your accountant for advice on structuring these incentives to be as beneficial and cost-effective as possible.

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.

© CA(SA)DotNews

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Read more about the article SARS Admin Penalties: What Taxpayers Can Do
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SARS Admin Penalties: What Taxpayers Can Do

“…imposing administrative non-compliance penalties is to ensure the widest possible compliance with the provisions of a Tax Act … they are imposed impartially, consistently and proportionately to the seriousness and duration of the non-compliance.” (SARS)

The Tax Administration Act stipulates that SARS can issue administrative penalties for outstanding tax returns.

In previous years, penalties were only imposed on taxpayers with more than one tax return outstanding. Since December, due to changes in the Tax Administration Act, SARS can apply administrative penalties to taxpayers who have a single outstanding return.

As a result, hundreds of thousands of South African taxpayers have received administrative penalties from SARS this year, many of them facing tax debt of tens of thousands of rands, accumulated over many years.
When are penalties incurred?

SARS can raise administrative penalties if a taxpayer is non-compliant in a specific area of their tax affairs, including Personal Income Tax (PIT) and Corporate Income Tax (CIT), Pay as You Earn (PAYE) or value-added tax (VAT).

A percentage-based penalty is imposed when a payment is received late. To prevent a payment from being received late, the payment must be received into the SARS bank account on or before the due date.

SARS also imposes fixed amount administrative non-compliance penalties for outstanding returns and/or non-compliance for PIT or CIT. These include the once off PIT penalty imposed where the taxpayer submitted a return late as from 2020 year of assessment onwards.

There is also a recurring penalty for the failure to submit a return for PIT and CIT. The fixed amount penalty is based on a taxpayer’s taxable income and can range from R250 a month (where there is an assessed loss or no taxable income) up to R16,000 a month (where the taxable income exceeds R50 million) for each month that the non-compliance continues.

For PIT, the recurring penalty is imposed where the taxpayer failed to submit an income tax return for years of assessment from 2007 onwards, when that person has one or more income tax returns outstanding.

For CIT, the recurring penalty is imposed where the company has failed to submit an income tax return for years of assessment from 2009, where SARS has issued the company with a final demand and the company failed to submit the return within 21 business days of the final demand.

As such, penalties are now applied monthly for tax returns dating back many years.

Companies also face administrative penalties for PAYE. If an employer has failed to submit an EMP501 reconciliation declaration on time, an admin penalty of 1% per month over 10 months, based on the employer’s liability over 12 months, is levied.

What are the costs of the penalties?

Percentage-based penalties are often steep, such as the 10% late payment penalty on VAT or PAYE, or the penalty of 1% over 10 months where an EMP501 was not submitted in time.

But it is the recurring penalties levied every month that really snowball. This is because SARS will keep penalising non-compliant taxpayers month after month until the outstanding returns are submitted, or up to a maximum of 35 months, if the taxpayer’s address is known, or 47 months if the taxpayer’s address is unknown.

Even at the lowest monthly admin penalty of R250, just one return outstanding for 35 months will have already racked up a tax debt of almost R9,000, not including interest.

Remember, unpaid penalties will also attract interest for each month they remain outstanding.

If you ignore Admin Penalty notifications from SARS, it will keep levying these penalties. In addition, the individual or company will have a non-compliance tax status. If a tax refund is due to the taxpayer, SARS will not pay the refund until any outstanding penalties are paid. Penalties can also only be offset against a refund after approval of a formal request to SARS.

Ultimately, if the admin penalty is not paid, SARS also can appoint an agent, such as a bank or employer, to collect the money on its behalf.

What should you do if you already have admin penalties?

If you have admin penalties, you need to do two things immediately:

  1. Correct the non-compliance by filing the outstanding return/s; and
  2. Pay the penalty on time or submit a request for remission of penalties.

Your accountant will be able to assist you with remedying the outstanding returns, including finding the outstanding documents, and the penalty payment. For example, if you are unable to pay any outstanding tax and penalties immediately, your accountant will help you enter into a repayment plan with SARS to pay it off.

However, if there were legitimate reasons for not filing an outstanding return, a taxpayer can dispute an administrative penalty through a request for remission to SARS for the penalty to be waived.

If you want to request a remission of the penalty from SARS, it is a good idea to rely on your accountant’s assistance. This is because a remission is only considered once the non-compliance has been remedied and where the taxpayer can show certain reasonable grounds, such as a first incidence non-compliance or if the duration of the non-compliance is less than five business days. Certain exceptional circumstances such as serious illness or accident, social disturbance or natural disasters will also be considered.

SARS says that administrative penalties will be “imposed impartially, consistently and proportionately to the seriousness and duration of the non-compliance,” so requests for remission are not always successful – or may result in only part of the penalties being reversed.

Avoiding penalties going forward

It has never been more important for individuals and companies to achieve and maintain tax compliance.

Taxpayers need to submit returns even if they are not earning an income and even if a company is dormant. In these cases, individuals and companies must submit zero returns to SARS or face mounting penalties. Where a company will remain dormant, consider deregistering the company with the Companies and Intellectual Property Commission (CIPC) and with SARS for the various types of tax.

When facing admin penalties now or in the future, the expertise and experience of your accountant or tax practitioner will be a key success factor in achieving and maintaining tax compliance.

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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Read more about the article The Hidden Costs of Starting a Business
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The Hidden Costs of Starting a Business

“There are only two things in a business that make money – innovation and marketing, everything else is cost” (Peter Drucker, author)

Running a business is never cheap and starting one up may be one of the most expensive things you ever do. According to the U.S. Small Business Administration, most microbusinesses cost around R60 000 just to get to the point where you are ready to start operating. Clearly, larger businesses with extensive infrastructure would cost much more. While it’s easy to plan for obvious production costs, office equipment, marketing and even taxes, the hidden costs we list below may come as something of a surprise.

  • Registration, licences and permits

    Business registration is a cost that is absolutely essential for all businesses. Just registering a business name will require a payment to the CIPC.

    Depending on your industry there may also be licences and permits necessary to manufacture or sell your products. This is particularly relevant in the manufacture and supply of foods. Restaurants, hotels and B&Bs may also need permits to offer specific services and any business that wants to make use of natural resources, such as fish, water, or land will undoubtedly also need to pay for government permission. Health clinics, spas, nightclubs and many more will also have to find money to meet permit requirements.

  • Business Insurance

    Not every business owner needs to take out insurance, but anyone with a business that deals with the public would be wise to at least cover their liabilities in that regard. If employees are going to operate onsite, employee liability insurance is also highly recommended. In addition to this you may need to insure key equipment, vehicles, and important and expensive stock items.

  • Shrinkage

    Shrinkage is any loss of inventory that occurs before it can be delivered to your customer. New business owners may not account for any loss whatsoever, but studies indicate that depending on the industry, shrinkage can account for up to 7% of turnover.

    Usually though, shrinkage will be in the region of 1% to 2% of turnover, which can add up.  These losses come from customer thefts, employee fraud, administrative errors and damage, and need to be controlled, but the truth is, some will always sneak through and have to be accounted for in any business calculations.

  • Delayed payments

    New business owners might develop their projections based on their sales always going to customers who pay for the products or services as soon as they are received. The reality of doing business is that this is extremely rare. Some large corporates may only pay on a 90-day cycle.

    Meanwhile, new stock must be purchased/developed and staff have to be paid. Taking loans to cover costs because of delays will result in interest payments, whereas monies held back to meet these payment requirements will mean that other investments or growth opportunities will have to be delayed. All of this incurs unexpected costs. It is therefore essential that you meet with your accountant to determine the most cost-effective way to meet your obligations and keep the company running.

  • Banking and credit card costs

    No matter which bank you use, their services do not come free. Whether it’s structured through monthly account fees, transaction charges or interest on credit cards, businesses will end up paying a significant portion of their income to their financial service providers. Every bank will structure these costs differently, so it’s important for a company to find the one that best suits their way of doing business.

  • Administrative costs

    Working for someone else, it’s hard to imagine just how much the everyday office costs to run. Everything from toilet paper to paper clips, and printer paper costs money. Even if you aren’t offering free coffee and tea to employees, you can still expect to pay for cleaning supplies, software registration fees and the electricity bill at the end of the month. Individually these items don’t cost a lot, but added together they will amount to a significant extra burden each year.

  • Market research

    Many business owners start their businesses based on their own knowledge and gut feel for their industries. This is generally a good starting point, but getting a company to thrive requires a solid knowledge of your market and your product’s key differentials. This takes market research, and this isn’t free.

    You do not necessarily have to hire an expensive consultancy to do the market research for you and can choose to instead do it in-house through emails and phone calls. Whichever way you go, however, it will take money, and time, both of which are valuable resources you may not have accounted for.

  • Hiring and training costs

    Entrepreneurs know of course that they will have to pay the staff they employ. They probably also know that each employee costs the company more than their simple salary. What they may not take into account is that hiring someone costs money and training them up to standard costs even more.

    Hiring someone may well require you to either contact an agency or pay to put adverts online. Then there is the process of vetting CVs, conducting interviews and ultimately bringing someone on board. All of this costs money as does the time, and equipment needed to train them for their position.

  • Graphic Design

    Building a successful company will also require you build a recognisable brand. This takes proper logo and website design alongside copywriting fees for working brand slogans, corporate values and web content. All of this costs money, but without it, you can’t expect to maximise your profits.

    In order to ensure you aren’t surprised by unanticipated business expenses, there is one other cost you should always budget for – an accountant. Your accountant will be able to help you make the crucial decisions that stretch your money as far as possible each month while ensuring you aren’t tripped up by these hidden costs.

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.

© CA(SA)DotNews

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Read more about the article Dispute with SARS? Here are the New Rules…
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Dispute with SARS? Here are the New Rules…

“The importance of the ability of taxpayers to challenge the legality of actions and decisions within the tax system is internationally recognised.” (Taxpayers’ Rights: Theory, Origin and Implementation)

In South Africa, taxpayers have the right to dispute tax assessments, interest, late payment penalties, and administrative penalties for various taxes, including Personal Income Tax (PIT), Corporate Income Tax (CIT), Value-Added Tax (VAT), and Pay-As-You-Earn (PAYE). This is done by submitting requests such as Request for Reason, Request for Late Submission (Condonation), Request for Remission (RFR), Notice of Objection (NOO), Notice of Appeal (NOA), and Suspension of Payment.

Recent changes to the procedures to lodge an objection and appeal against an assessment or decision aim to enhance the efficiency and effectiveness of tax dispute resolution. Here are the key changes:

  • Taxpayers now have 80 business days to file a Notice of Objection against a SARS assessment or decision, a significant increase from the previous 30-day window. Taxpayers are not obliged to wait the full 80-day period.
  • All substantiating documentation must now be submitted within the extended 80-day objection period, making it crucial to request reasons for an assessment before objecting. Previously taxpayers were only required to list the substantiating documents. 
  • Taxpayers can request an additional 30-day extension beyond the 80-day period for valid reasons and, in exceptional cases, an extension up to three years.
  • Taxpayers and SARS can agree on shorter periods for dispute resolution, not just extensions as per the old rules.
  • Taxpayers can appeal the outcome of an objection on new grounds not raised in the NOO, if it doesn’t pertain to a previously unchallenged part of the assessment.
  • Alternative Dispute Resolution (ADR) changes now require facilitators to have appropriate tax experience and to be acceptable to both parties. A senior SARS official must appoint the facilitator within 15 days of the ADR commencement. Interim ADR reports must be delivered within five days after the meeting, and final reports within 10 days following the end of ADR proceedings.
  • SARS must now issue assessments within 45 days of a settlement being reached in a dispute and/or after receipt of the Tax Court’s decision from the Registrar.
  • SARS must provide a statement explaining why they made an assessment and why they oppose an appeal to the tax court. SARS can now add new grounds for disallowing objections or appeals, unless it changes the assessment basis significantly or requires a new assessment.
  • Changes to the Tax Board and Tax Court processes include the issuance of subpoenas by the Tax Board clerk or Tax Court registrar, with parties having the right to challenge these if they find them irrelevant or unreasonable.
  • An email address is now expressly included as an ‘address for delivery’.
What’s still the same?
  • SARS must inform taxpayers of assessments, notifications or communications issued by also sending a message to the taxpayer’s last known number or email. Keep your contact details updated and check your compliance status regularly, especially when receiving emails or SMSs from SARS.              
  • Submitting an objection or appeal does not suspend the payment of a tax debt. To prevent SARS from instituting collection proceedings, taxpayers must file an objection as well as a “Request for Suspension of Payment.” If granted, SARS cannot commence collection proceedings pending the outcome of the objection or appeal, but interest will accrue on the unpaid debt. 
  • The importance of involving a qualified tax advisor early in the process cannot be overstated, especially where penalties and interest have already been imposed, and particularly if the objection is submitted after the prescribed due date.

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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Your Tax Deadlines for November 2023

  • 7 November – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 29 November – Excise Duty payments
  • 30 November – 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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Read more about the article The Risky New Trust Landscape – What Trustees Need to do Now
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The Risky New Trust Landscape – What Trustees Need to do Now

“The common assumption is that trusts are some kind of tax panacea…Then, conversely, from a South African Revenue Service (SARS) perspective, trusts are viewed with a degree of suspicion and mistrust. [T]he truth lies somewhere between these positions.” (Broomberg on Tax Strategy)

The legal and tax landscape in which South African trusts operate has changed substantially over the last few months, thanks to changes to the Trust Property Control Act (“Trust Act”) and the Financial Intelligence Centre Act (“FICA”) by the General Laws (Anti Money-Laundering and Combating Terrorism Financing) Amendment Act, as well as new rules and requirements from SARS.

These changes impose new duties on trustees, and apply to all trustees, not only independent trustees.

1. Disclosure to Accountable Institutions you engage with, and record-keeping

Changes to the Trust Act impose two specific new requirements on trusts to combat money laundering and crime-financed terrorism, and failure to comply is an offence. If convicted, trustees face a fine of up to R10 million, or imprisonment for a period of up to five years, or both. These requirements became effective on 1 April 2023, leaving most trustees already non-compliant.

The first new requirement is that a trustee must disclose to any “accountable institution” (see here for the full list of what comprises an accountable institution, but the definition includes banks, attorneys, estate agents, long term insurers and brokers, trust companies and the like) that he/she engages with it in his/her capacity as a trustee, and that the relevant transaction or business relationship relates to trust property. The trustee must also record the details of the accountable institution the trust is engaging with.

2. Compiling and registering beneficial ownership

The second requirement imposed by the changes to the Trust Act is to establish and record the beneficial ownership information of a trust; to keep an up-to-date record of this information; and to lodge a register of the beneficial ownership information prescribed with the Master of the High Court.

This second requirement recently doubled, as SARS issued notice that trusts will now also be required to submit beneficial ownership details when completing a trust tax return, among a number of other tax changes affecting trusts, as discussed below.

3. Filing third-party returns – the IT3(t)

A further onerous obligation was imposed by SARS:

Most trusts are now also required to file third-party returns, in the same way banks report interest income and medical aids report medical aid tax information to SARS, which it uses to, for example, pre-populate tax returns.

While trust distributions were not previously reported to SARS by third parties, the new requirements oblige trusts to file third-party returns to SARS to declare distributions and vesting amounts to beneficiaries.

This must be done via an IT3(t) report which contains prescribed information relating to trust distributions and their beneficiaries and requires trusts to report on demographic information of the trust, demographic information of trust persons/beneficiaries, trust financial flows, and any amounts vested in a beneficiary, including net income, capital gains and capital amounts.

The ITR3(t) must be submitted by 31 May of each year. The first submission will be for the 2024 year of assessment, with the first ITR3(t) due by 31 May 2024. This is the same as the due date for IT3(b) and IT3(c) returns for trusts, which report interest, dividends, and capital gains or losses to SARS, and will certainly present practical difficulties in meeting the deadlines.

4. Completing more probing trust tax returns

With the trust filing season now open, SARS has also reminded trustees that ALL trusts are required to register for income tax purposes and that the representative taxpayer – most often the trustee/s – must submit a trust return.

SARS also recently introduced changes to the Income Tax Return for Trusts (ITR12T) with additional questions, and more mandatory supporting documents.

As mentioned, SARS has added a Beneficial Ownership Declaration page to the trust return to record all beneficial owners, and has indicated this information will be reconciled with the information reported to the Master’s Office to identify any discrepancies.

The changes also include additional questions to determine if any local or foreign amount(s) were vested in the trust as a beneficiary of another trust, or deemed to have accrued; and the number of trusts from where these amounts were received.

In addition, beneficiaries and donors (where deeming provisions apply) of a trust must declare their income that was vested in a beneficiary by the trust during the year of assessment in their income tax returns.

A range of mandatory and supporting documents must be submitted with the ITR12T. Depending on the trust type, this includes the Trust Deed and Letters of Authority, details of the ‘Main’ Trustee who is the registered representative to SARS; Annual Financial Statements, confirmation of banking details, and resolutions/minutes of trustee meetings that document significant decisions and actions taken by the trustees.

5. Registering as an “accountable institution”

Due to amendments to FICA, trustees, trust accountants and trust administrators may – in certain instances – have to register as “accountable institutions” with the Financial Intelligence Centre (FIC). See the link and comments in paragraph 1 above for the full definition of “accountable institution” but, if in any doubt, be sure to confirm with your accountant whether you need to register as an “accountable institution” in terms of the new rules, and to obtain assistance in doing so where required.

Professional assistance strongly recommended

Given all these new laws and requirements, the complexity of the processes necessary to comply, the impossible deadlines – some of which have already passed – and the hefty penalties involved, if you are a trustee you should urgently seek assistance from your accountant to ensure you can successfully navigate this new trust landscape.

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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Read more about the article Tips for Pacing Business Growth for Sustainability
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Tips for Pacing Business Growth for Sustainability

“Growth is never by mere chance; it is the result of forces working together” – (James Cash Penney, Founder of JCPenney)

Every business decision carries profound consequences for the enduring existence of the organisation, and this is no more true than when it is applied to those decisions affecting business growth. Knowing how and when to expand, open new branches, roll out new features or engineer new products takes planning and is not something leaders should be trying to do by the seat of their pants in response to external events. A meticulously crafted business growth strategy is therefore essential to plotting sustainable growth. Here are the things you will need to consider when constructing yours.

Set clear targets

You know you want to be successful, but do you know what that success looks like? Just how much money do you want to make? What do you want the lifestyles of your employees and yourself to be like? What kind of turnover and profit would you consider to be successful? What would you like your reputation in the industry to be? If you haven’t considered the destination for your journey, how will you ever plot how to get there?

Talk to customers

You probably already realise the value of getting expert advice. Speaking to accountants about your finances, or lawyers about contracting just makes sense. But perhaps you have not considered that no one knows your customer’s needs quite like your customers? When choosing which customers to speak to, first look to those who are your ideal customers – those people who are getting good value from your services and who are happy with your products. By speaking to them, you will slowly uncover patterns for what you are doing right and what a successful business in your industry looks like.

The next step is to speak to those customers who are not happy with your service and find out why. This will help you to uncover the opportunities you are missing, and the things you need to fix to get yourself onto the right growth path.

Don’t ask these customers what you should be doing though, as changing everything based on the impressions of a few disgruntled clients is a sure-fire way to failure. Rather ask them what the challenge was that they came to you to fix, why they came to you specifically, and then what they were feeling at each stage of their journey. Once again, it is about uncovering patterns, and by asking these sorts of questions you will quickly work out whether you did something wrong, whether your services lack potential solutions the industry might need or whether you were simply the wrong fit all along.

Now that you know what a successful client interaction looks like, and where your business is falling short, it becomes easier to see which holes will need to be plugged and where you can comfortably expand over the coming years.

Build a road map

Now that you know where you want to be, and the things that will help you to get there, the next step is to set targets within your company to move things in that direction. With your long-term goal already established, and the information you have on hand it is now easier to start breaking that long term goal into short term targets. How many people do you need to hire this year to ensure they are trained for where you want to be five years from now? How soon should your factory be upgraded to take advantage of missed opportunities? What must marketing look like now, for your customers to all know about you five years in the future?

Of course, cash flow and profitability are all going to play a part in what can be achieved now and what will have to wait. Your accountant will be able to help you prioritise your expenses, and make sure you get the most out of your investments without risking your cash flow and the related ability to meet financial obligations.

Now is also the time to institute your company KPIs (Key Performance Indicators) and get everyone singing from the same hymn sheet. Your profit needs to grow steadily year-on-year if you want to make the big long-term target, so breaking it down into manageable bite size chunks is critical. Remember to also consistently track client satisfaction, revenue per client, client retention, and employee satisfaction. KPIs help you identify what tactics are working and which aren’t, so you can make adjustments to your strategy and achieve your goals.

Plan for disruptions

Before you reach your goals there are going to be setbacks. Whether its key staff leaving, new competition entering the market or surprising new developments, these disruptions are going to slow down your growth. To make sure that the impact of these is lessened it is critical that you think about diversifying your income streams to mitigate high concentration areas or reliance on one client. You should also pinpoint succession candidates for your key positions and begin training now to ensure they are ready when the time comes for them to step into a departing employee’s shoes. Try to picture which disruptions might hit the business the hardest and start threading the solutions into your targets and growth plans to ensure that when they do arrive, you are ready.

Stick to the plan

While many believe that being scrappy, flexible and prepared to change the whole business on a dime is the best path to success, history proves that long term growth instead comes from having a properly constructed plan that takes into account all aspects, including possible future disruptions, and then sticking to it. At times you may be tempted to deviate heavily from the plan, but if you are matching KPIs and growing the business, do not give in easily. Don’t make decisions on a whim and rather apply yourself to the plan, making smaller adjustments along the way as necessary. After all, you made the plan for a reason.

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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Read more about the article Why the Four-Day Working Week Just Might Happen
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Why the Four-Day Working Week Just Might Happen

“We need to do a better job of putting ourselves higher on our own ‘to-do’ list.” (Michelle Obama, former First Lady of the United States)

The four-day work week has been in the news a lot recently with a number of significant studies and trials coming out in favour of the arrangement. While many would assume that workers are thrilled with four-day weeks, but that bosses are finding it hinders business, the results do not back this up. Repeatedly, these studies are coming out in support of the four-day work week with the benefits simply racking up. Here are the reasons why it just might work:

Employees want it

In terms of work schedules, employees are increasingly seeking flexibility, with a four-day workweek emerging as their top preference, according to a recent survey of American employees conducted by Bankrate. The survey revealed that a significant majority of full-time workers and job seekers, a staggering 81%, express strong support for a four-day workweek over the conventional five-day arrangement.

What’s more, an impressive 89% of these respondents indicated their willingness to make sacrifices in order to enjoy a four-day workweek. Among these concessions, a noteworthy 54% are open to working longer hours, while a substantial 37% are even willing to explore career changes or transition to different industries. Additionally, a considerable 27% are open to increasing their in-person office presence or working entirely on-site.

Productivity Increases

Many assumed that a four-day work week would hamper productivity, but a recent study in the UK that included 61 companies and more than 3000 workers found exactly the opposite. The study, which followed the companies and their workers through a six-month test of a 32-hour, four-day week, with no loss of pay for employees was the largest of its kind, making its results extremely impactful. Perhaps more impressive though, is that after the study was over, 56 of the 61 companies that were involved decided to continue with the shorter week indefinitely, and two more said they were voluntarily extending the trial.

Among the benefits reported by companies were an increase in revenue over the same period in previous years, as well as a sharp decline in resignations. One company reported a productivity increase of 22%, a lower carbon footprint as well as an increase of 88% in job applications, and a 66% decrease in absenteeism.

The results back up those achieved by a smaller pilot program that covered another 30 companies and 1000 employees.

Employees are happier

As for employees, well they were almost unanimously happy. Participation in the above trial led to a significant decrease in people saying they lacked sufficient time during the week to attend to their responsibilities towards children, grandchildren, or elderly family members.

Additionally, they reported feeling reduced work stress as well as better mental health, more time for exercise, better sleep and generally less negativity. 55% reported an increased ability to work. The results also suggest that the shortened workweek could lead to better gender parity as the time men reported spending with their children increased nearly double that reported by women. So impactful were these benefits that 15% of employees said there was literally no amount of money that could make them go back to 5 day working weeks.

If your company chooses to adjust your working hours to fit in with the four-day work week, there are numerous ways to do it. Do you give extra days off to make up for the shorter week, work with Fridays or Mondays off, or allow employees to simply work fewer daily hours? The various options will come with their own unique financial considerations, and you should speak to your accountant to make sure you make the most of the new situation.

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.

© CA(SA)DotNews

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Read more about the article Don’t Fall Prey to the Most Common Cybercrimes!
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Don’t Fall Prey to the Most Common Cybercrimes!

“The bottom line is that cyber risks sit right alongside rising systemic risks, and is the biggest emerging, and constantly evolving risk facing businesses today.” (SHA Specialist Risk Review 2022)

In Africa, Interpol has identified phishing – particularly Business Email Compromise (BEC) – as well as online scams, as both the biggest current crime threats, and the crimes most likely to increase in the next three to five years.

This is Interpol’s list of the prominent cyberthreats identified in the African region:

  • Business Email Compromise
  • Phishing
  • Cyber extortion including ransomware attacks
  • Online scams
  • Banking trojans and stealers

Below, find out how these cybercrimes are perpetrated and how to protect yourself, your company and your employees with tips from SABRIC and CISA.

Business Email Compromise (BEC)

For 7 consecutive years, BEC attacks have been the most financially devastating cyber threat worldwide, and continue to be the most prevalent cybercrime, says Interpol. A type of phishing attack, it causes significant financial losses and often reputational damage.

It includes cybercriminals using an organisation’s email account to send out fraudulent messages with malicious links or attachments that install malware or steal confidential information.

Most commonly, however, BEC involves cybercriminals manipulating emails, especially payment requests containing bank account details. This is because it’s common business practice to send confirmation of or changes to bank details, or invoices containing bank details, via email.

In BEC attacks, these emails are intercepted – or fraudulent emails or invoices are created – changing the account details to the cybercriminal’s account. Any payments subsequently made are lost to cybercrime.

A recent High Court ruling in this regard, set a precedent applicable to all businesses, as the judge noted: “… the plaintiff’s case established clearly that sending bank details by email is inherently dangerous, and so must either be avoided in favour of, for example, a secure portal or it must be accompanied by other precautionary measures like telephonic confirmation or appropriate warnings which are securely communicated.”

Specific BEC preventative measures include:

  • Inform clients that your company will never change banking details via letter, SMS or email.
  • Consider not putting banking details on your invoices – rather ask customers to phone you to check the details they have.
  • Use bank-defined beneficiaries for online banking where possible.
  • Before making payment to a supplier’s bank account after receiving an emailed invoice, check that the bank account details on the invoice are genuine.
  • If you receive any instructions to change banking details from a supplier, call them to verify.
  • Check with your insurers if you can get cover for this risk.
Phishing

One of the oldest, most pervasive cyberthreats and a major source of stolen credentials and information, phishing is a cyber-attack aimed at stealing sensitive information like usernames, passwords and credit card details, typically using deceptive emails or websites, apparently from trusted sources, that contain malicious attachments or links to viruses or malware.

Phishing is linked to an estimated 90% of data breaches and causes not only direct financial losses but enables other forms of cybercrime.

Cyber extortion and ransomware attacks

Cyber extortion involves cybercriminals using digital methods to threaten or extort victims for money and/or assets. It often involves the attacker threatening to reveal embarrassing personal information, delete important data, sabotage systems and networks, or launch distributed denial-of-service (DDoS) attacks.

An increasingly popular type of cyber extortion is ransomware, a malicious software that locks users out of their own data, business systems and devices by encrypting their files. Victims must pay a ransom to have their files decrypted and regain access.

Such attacks can be extremely costly to businesses with substantial financial losses incurred due to ransom payments and recovery efforts, as well as downtime, lost production, and reputational damage.

Ask your accountant for help in preparing a business continuity and disaster recovery plan so you are prepared if the worst happens.

Online scams

Online scams take advantage of users’ poor levels of digital literacy to lure them with false promises. Below are the most common online scams increasingly prevalent in the African region.

  • Advance payment scams – fraudsters ask for financial deposits and then fail to deliver goods or services.
  • Shopping scams – criminals deceive online buyers to pay upfront and then receive counterfeit items or nothing at all.
  • Romance scams – criminals create a false social media identity and build an emotional connection with a victim, with the aim of soliciting money or gaining access to personal accounts.
  • Tech support scams – criminals posing as representatives from technology companies offer technical assistance to gain access to users’ computers and extract valuable data such as passwords and financial information.
  • Cryptocurrency scams – criminals entice investors into buying fake currencies.
Banking trojans and stealers

These malicious software programs are spread through phishing emails and malicious websites to steal sensitive information such as usernames, passwords and financial data by capturing keystrokes or stealing login credentials from unsuspecting victims. Cybercriminals may use the information to steal money directly from the victim or sell the information on underground markets.

What are the risks?

According to the 2022 SHA Specialist Risk Review, cybersecurity ranks third on the list of top threats for local businesses, after power disruptions and labour matters.

The report says that not addressing cybersecurity opens companies to a range of risks, including:

  • the financial loss of payments made into incorrect accounts due to BEC;
  • the financial impact of business interruption due to a cyberattack;
  • the financial impact of having to pay a ransom;
  • the legal consequences that follow a breach of confidential or personal information;
  • the reputational consequences that may impact a company’s share price and brand.
How to prevent becoming a cybercrime victim 
  • Keep applications, software and operating systems (OSs) updated with the latest patches.
  • Use and keep updated preventative anti-virus and anti-malware protections, software and protocols, as well as data encryption, firewalls and email filters.
  • Use long, complicated passwords and change them often.
  • Always double check you’re really on the right website or app. Only download apps from trusted app stores.
  • Use YIMA, a website vulnerability scanner, to do website security checks for scams, known vulnerabilities and security headers.
  • Register for 3D Secure to secure your card details and use secure payment portals with two-factor authentication (2FA).
  • Backup your system and other important files, and store on a separate device not accessible from the network, like an external hard drive.
  • Beware of phishing emails. If an email looks suspicious, verify the email’s legitimacy by contacting the sender directly.
  • Do not click on links or icons in suspicious or unsolicited emails, and do not reply – delete immediately.
  • Be careful when clicking directly on links in emails or opening email attachments, even if the sender seems legitimate.
  • Don’t fall for any offer that seems to be too good to be true – it usually is.
  • Never provide your password, credit card or other financial information, or control of your computer, to a third party who calls unexpectedly.
  • If you suspect you are being targeted by a scammer, stop all communications immediately and report it.
  • If you click on a harmful link, immediately disconnect your device from the internet by unplugging your network cable or disconnecting from the Wi-Fi, then run a full anti-virus scan.
  • Regular, mandatory cybersecurity awareness training for all employees is crucial to keep everyone informed about the latest cybercrime techniques.

October is Cyber Security Awareness Month – Stay Alert!

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.

© CA(SA)DotNews

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Your Tax Deadlines for October 2023

  • 6 October – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 30 October – Excise Duty payments
  • 31 October – 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.

© CA(SA)DotNews

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Read more about the article Using a “Risk Matrix” to Risk-Proof Your Business
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Using a “Risk Matrix” to Risk-Proof Your Business

“Don’t be fearful of risks. Understand them, and manage and minimize them to an acceptable level.” (Naved Abdali, Financial journalist and author)

Managing risk in your business is absolutely critical for developing it to success. Knowing exactly which threats are really relevant and which will help any leader to develop strategy and prepare for the worst eventualities. One of the simplest and most useful ways of determining the greatest risks to a business is through developing a “risk matrix”, otherwise known as a “risk assessment matrix”. Risk matrices give leaders a visual way of understanding the risks in their business by plotting these risks on a grid.

An example to illustrate…

Let’s illustrate the concept with the help of an example. A catering company has identified three risks to its business and has plotted them on a typical matrix which looks like this –

Source: Adapted from a template available for free download from ProjectManager.com

As you can see –

  1. The caterer has decided that a food poisoning event is deemed to be unlikely but with severe consequences. This puts it in the orange “High” category.
  1. Staff not arriving for shift is deemed likely with major consequences. This puts it in the red “Very High” category.
  1. Catering customer paying a month late is deemed possible with insignificant consequences. This puts it in the green “Low” category.

This allows the caterer to visually compare the identified risks with one another at a glance, and to prioritise addressing them.

Create your risk matrix in the context of your own business

Any risk that is high on the likelihood scale and high on the consequence scale needs to be paid attention to immediately, while conversely those that are low on both axes can be attended to last.

Leaders would determine where each individual risk falls on the matrix dependent on the context for their own business. For example, while a food poisoning risk may be a very low risk and unlikely event at a mining company, it is more likely for, and could mean bankruptcy for, a catering company.

This simple outline may differ depending on the organisation or leader using it. Often, they appear colour coded with severe risks marked in red and less severe ones in blue or green. The effect of the matrix, however, remains the same, so choose whichever format works for you.

How to build your risk matrix

There are essentially four steps to creating a risk matrix, each of which will be influenced by your knowledge of your business and its particular details.

1. Identify risks

The first step is to identify all the likely risks to your business. You cannot plan for things that you don’t know about and haven’t imagined. At this stage every avenue should be covered, and each eventuality considered. The catering company cannot prepare for a mass food poisoning if they have never even considered it enough to put it on their risk matrix. Risks are not just direct dire threats, however, and include anything that could prevent your company achieving its goals or bring harm to its staff or customers or investors.

2.  Evaluate them

This is the critical stage that makes the risk matrix work. Looking at the list of risks, you must determine which of those could cause a critical failure to your business and which are merely small annoyances. You should also determine which of these risks are likely to happen and which are more fanciful and unlikely. This is a subjective decision you will make dependent on the unique circumstances of your own company.

In the catering company example above, we have mentioned how a client paying late may be of insignificant consequence. Perhaps this is an established company, with good cash reserves? A newer company, that is not in as strong a position may deem the risk level of a late payment to be closer to severe making it a “Very High” threat to the existence of the business.

3. Enter them into the matrix and prioritise them

Now that the threat levels have been determined, these values can be entered into the matrix and the danger of the various threats can be measured against one another.

Low risks, or those that would fall within a green area, can generally simply be accepted and no risk-mitigation actions need to be taken.

Moderate risks, or those that would fall within the yellow area, will likely need risk-mitigation strategies to reduce their likelihood or improve circumstances should they occur.

High risks, or those that fall within the red area, need to be urgently attended to. Processes need to be put in place to eliminate these risks or greatly reduce their likelihood of occurrence. This may involve staff training, or changes to entire systems of logistics and ordering.

Continued analysis

Risk management is not something that is set in stone. Risks may move within the matrix over time dependent on internal and external factors. Increasing interest rates, for instance, may move cash flow problems higher up on the matrix, while the discovery of new mineral deposits may make the threat of raw material shortages lower. Leaders should be prepared to update their matrices in-line with these new events.

Weaknesses

While risk matrices are extremely useful in decision making, problem solving and communication of challenges, they are not without their weaknesses. Good leaders should be cognisant that due to the matrix’s reliance on context and the leader’s own subjectivity, errors can creep in due to over- and under-estimation of threats. A risk matrix is therefore something that should be shared with the team, and other interested parties such as investors, and partners, and feedback should be sought to lower the risk of this happening.

The bottom line

In the end, risk matrices are a powerful tool to help you manage your company’s risk. In the hands of knowledgeable and experienced leadership they have helped numerous companies to thrive or to avoid harm when the risks eventually become realities.

Ask your accountant to help you identify and address those risks that are particularly relevant to your business!

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.

© CA(SA)DotNews

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Common Tax-Related Criminal Offences, and How to Avoid Them…

“The difference between tax avoidance and tax evasion is the thickness of a prison wall.” (Denis Healey, former British prime minister)    

Section 234 in Chapter 17 of the Tax Administration Act (TAA) sets out a list of criminal tax offences. If prosecuted and convicted of a tax criminal offence, taxpayers will – at the least – be subjected to a substantial fine and may even face the maximum penalty of imprisonment for up to two years. There are also other harsh consequences of a criminal conviction under section 234, such as a negative impact on the eligibility of individuals to hold certain positions and to emigrate from South Africa, as well as reputational damage and a loss of both shareholder value and stakeholder trust for corporate taxpayers.

These tax criminal offences range from serious offences, such as intentional tax evasion and frustrating SARS in carrying out its duties, to relatively minor breaches, such as failing to notify SARS of a change in registered particulars.

Common tax criminal offences
  • Not registering for tax purposes to evade paying taxes due.
  • Not submitting returns to SARS as and when required to evade paying taxes.
  • Not truthfully responding to SARS’ questions.
  • Not declaring income to evade paying tax on that income.
  • Lying about expenses, like business mileage or medical contributions, to reduce tax payable or obtain an undue refund.
  • Submitting fraudulent invoices to reduce Income Tax and VAT payable or obtain fraudulent refunds.
  • Employers deducting tax from employees (PAYE) and never paying it over to SARS.
  • Vendors, whether registered for VAT or not, charging VAT and never paying it over to SARS.
  • Not notifying SARS of a change in registered particulars.
  • Not retaining records as required under the TAA.
  • Issuing an erroneous, incomplete or false document required to be issued under a tax Act.
  • Neglecting to disclose to SARS any material facts which should have been disclosed.
  • Obstructing SARS officials in doing their duties.
How SARS views taxpayer behaviour

While taxpayers were previously merely penalised for human errors and simple mistakes – which are common given the complex tax processes and strict deadlines – a taxpayer can now be found guilty of an offence without SARS having to show that the taxpayer wilfully, deliberately and knowingly committed the offence.

This means even inadvertent or administrative errors can be penalised with a maximum penalty and that a substantially expanded range of taxpayer behaviours – and a greater number of taxpayers – are now open to criminal sanctions.

How to avoid committing tax criminal offences

SARS notes that among the steps that a reasonable person may take to avoid committing tax criminal offences is “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.”

Be sure to choose a specialist who is appropriately qualified and experienced, as well as a member of a professional controlling body that enforces strict standards, such as SAICA (South African Institute of Chartered Accountants).

Advice from a professional can ensure that an appropriate tax strategy is formulated to proactively manage tax risk in the long term, which will save time and money and avoid expensive tax mistakes while keeping in line with the ever-changing tax obligations.

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.

© CA(SA)DotNews

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Corporate Taxpayers: Hello Tougher SARS Verifications

“Any taxpayer can be selected by SARS for verification for the purpose of proper administration of tax, including on a risk basis.” (SARS)

Companies must, within 12 months of their financial year-end, submit to SARS an Income Tax Return for Companies (ITR14), as well as supporting documents, declaring their full income tax responsibility to SARS. This declaration, return and supporting documents may be selected for verification by SARS.

A verification involves the comparison of the information declared on the return to the taxpayer’s financial and accounting records and other supporting documents. The purpose of a verification is to ensure that a declaration or return represents a taxpayer’s tax position fairly and accurately.

Previously, when companies were identified for a verification, SARS required them to submit the Supplementary Declaration for Companies or Close Corporations or IT14SD form. This is no longer required by SARS, but it will increase the scrutiny companies face when selected for verification.

What has changed?

The requirement to submit an IT14SD in a verification case is replaced by a letter requesting specific relevant documents based on the reason for verification.

SARS also says that as of September last year, companies are no longer required to submit any outstanding IT14SDs and that should taxpayers receive any further notification or final demand letter to submit an IT14SD, such request should be ignored. However, taxpayers should always check with their accountant before disregarding correspondence of any kind from SARS.

What’s still the same?
  • The requirement to submit relevant documents upon submission of the ITR14.
  • All correspondence will still be issued as before.
  • The process of dealing with the verification case will remain the same.
  • The submission of specific relevant documents will be required during the verification process.
  • The verification of a company always requires the submission of a signed set of Annual Financial Statements (AFS), as well as a detailed Tax Computation and the underlying supporting documentation/schedules (e.g. Tax pack).
  • When requested to submit specific relevant documents based on the reason for the verification, companies are still required to submit the documents within 21 working days.
How does this affect your company?

When a company is now identified for verification, it will be notified of the verification, as is the current practice and will be requested to:

  1. Submit specific relevant documents based on the reason for the verification, or
  2. Submit a revised Corporate Income Tax ITR14 return.

To comply with a request to submit specific relevant documents, the requested documents must be uploaded using eFiling, or any other submission channel, including SARS Online Query system (SOQS).

Once the relevant documents are uploaded, a SARS verifier will be able to action the case. If the relevant documents are deemed insufficient, or additional documents are required, this will be requested. The relevant documents must still be provided within 21 working days. If a company does not comply with the request for relevant documents, SARS will raise a revised assessment to resolve the verification case, and will add back the related expenses, dependent on the specific relevant documents requested.

Companies can comply with a request to submit a revised Corporate Income Tax ITR14 return through a request for correction (RFC). Companies have the option of submitting one correction, which may or may not resolve the verification. However, the revised ITR14 will also be subjected to a risk evaluation.

Seek professional assistance

Being selected for a verification entails significant risk to any business. In addition to the time, cost and effort to collate the information, documents and clarifications required, the taxpayer could still be referred for audit as part of the SARS compliance process, even if the verification process has been completed.

Whether submitting a Corporate Income Tax ITR14 return or facing a SARS verification with a request to submit documents or to file a correction, you would be well-advised to rely on the expertise of your accountant to ensure compliance.

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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Quiet Quitting and How to Prevent It

“Quiet quitting” isn’t laziness…When they don’t feel cared about, people eventually stop caring. If you want them to go the extra mile, start with meaningful work, respect, and fair pay.” – (Adam Grant, organizational psychologist and speaker)

The idea of the recently acknowledged trend of quiet quitting is not really new at all. Some people have been coming to work and doing the bare minimum since work has existed. It has, however, become a lot more noticeable and, more important, socially acceptable since the pandemic. It’s therefore unsurprising that a 2023 Gallup report states that as few as 32% of employees now class themselves as engaged at work.

As any business leader knows, workers who are only barely fulfilling the terms of their contracts in the least productive ways can be detrimental to corporate culture and bottom line, and “quiet quitting” therefore does need to be addressed.

Causes

The time spent at home with families during the pandemic has awakened many employees to what work/life balance could be like with a little more life and a little less work. Rather than being the habit it had been before the pandemic, the return to work and the daily commute now seemed unnecessary and expensive. In instances where employees were forced to return to the office, resentment built and, without meaningful communication and explanation from management, began to fester.

At its core, therefore, quiet quitting is not laziness. It’s a direct response to a perception that employees are being used and that management does not really care about their needs, desires or hopes. If they don’t care about me, why should I care about my job?

What can be done?
  • Reward employees adequately
    The first step toward making an employee feel valued is to actually value them. Resources on the internet make it extremely easy for employees to see what other companies are paying for similar roles and if they aren’t earning the same, they will feel undervalued. Paying a good salary also leads to better employee retention, which lowers your recruitment and training costs and in businesses with small skill pools can ensure you stay ahead of the game. Your accountant will be able to assist you to determine just what you can afford to pay for each role, and how best to structure benefits to get the most from taxes.
  • Take care of employee mental health
    Those who engage in quiet quitting often state that their mental health was a critical reason why they did so. Proactively addressing your employees’ mental health needs is therefore a priority if you want them to be engaged at work.It is essential that you make sure work/life boundaries are a built-in aspect of any job. Simple rules like preventing employees from calling each other after hours, or keeping lunch hours free for lunch, will go a long way toward ensuring your employees don’t have to draw those lines themselves.

    Other ideas include matching overtime with additional time off or giving employees their child’s birthday as paid leave. Your accountant will be able to help you find funds to develop a wellness program that could include reduced gym fees or tickets to theatre, concerts or sports events.
  • Recognise hard work
    Feeling underappreciated is a large part of why people quiet quit. Working hard and having no one notice leads to people feeling unrecognised and unimportant. Make sure you acknowledge and visibly reward those employees who do work hard. With the right motivation it could even encourage others to step up as well.
  • Listen to your employees
    The ultimate reason for quiet quitting is the disconnect between management and staff. It is essential for team leaders to get to know their staff as human beings, to genuinely engage and listen and understand the challenges in their lives. People who view their bosses as caring human beings rather than faceless authority figures are much more likely to work harder to avoid disappointing their team. If they are then also adequately rewarded for doing so, this can lead to a strong positive spiral of effort.

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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Your Tax Deadlines for September 2023

  • 7 September – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 28 September – Excise Duty payments
  • 29 September – End of the 2nd Financial Quarter, 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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Read more about the article Tax Season 2023 Now Open – What’s New and What’s Not
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Tax Season 2023 Now Open – What’s New and What’s Not

“The submission of accurate personal income tax returns on time is important for a seamless filing season. Taxpayers must take control of their own tax affairs to ensure they are aware of their obligations and remain compliant.” (SARS Commissioner Edward Kieswetter)

SARS recently announced the dates and changes for the 2023 Tax Season, which opened on 7 July 2023 for individuals (non-provisional taxpayers and provisional taxpayers), as well as for trusts.

The deadline dates are as follows:

  • Non-provisional taxpayers who were auto assessed have until the normal filing season deadline, 23 October 2023, to file an amended return. Individuals who were auto assessed will receive an SMS or email from SARS.
  • Non-provisional taxpayers who are required to file a return and did not receive a notification from SARS that they were auto assessed must submit a Personal Income Tax Return (ITR12) before 23 October 2023.
  • Provisional taxpayers as well as trusts can file a return until 23 January 2024.
What’s still the same?

Much stays the same as last year, including that SARS will again issue auto assessments to taxpayers whose tax affairs are less complicated, usually non-provisional taxpayers who are formally employed.

SARS will send an SMS and/or email to inform taxpayers of the auto assessment, which can be viewed on eFiling or the SARS MobiApp. The auto assessments are based on the data SARS collects from employers, financial institutions, medical schemes, retirement annuity fund administrators and other third-party data providers.

If you agree with your auto-assessment – and have confirmed with your accountant that everything is in order – you are not required to file a tax return and you do not need to do anything further. Where your assessment shows that you owe tax to SARS, payment must be made on or before the payment due date displayed on the “Notice of Assessment” (ITA34). If a refund is due, simply wait for the refund, which can be expected within approximately seventy-two (72) hours if your banking details with SARS are correct.

If you are not in agreement with the auto-assessment, you can edit the declaration by completing and filing a tax return, along with the necessary supporting documents, before 23 October 2023, to enable SARS to consider a revised assessment.

What’s new this year?
  • Extended auto assessment deadline – this year SARS will allow taxpayers, who did not agree with the auto assessment outcome, to file an amended return until the normal filing season deadline, 23 October 2023. This is a change from the 40 days allowed last year. Where an auto-assessment is issued after 23 October 2023, the 40 business days will start on the date of the notice of the assessment
  • The payment due datesfor non-provisional eFilers will be adjusted to:
    • 30 days after a notice of assessment has been issued for taxpayers who have not been auto-assessment; or
    • 30 days post Filing Season 2023 closing date for auto-assessed taxpayers.
  • Spouses married in community of property assessment – this filing season SARS has retrieved “Married in community of property” status from taxpayer’s previous declaration and collaborated with the Department of Home Affairs to confirm marital status. Where the spouses are successfully matched and have interest investments, SARS will replicate the interest investment certificate on both spouses’ return and they will each be taxed 50% upon assessment.
  • Automated Section 93 reduced assessment process – the new automatedprocess of requesting Reduced Assessment in terms of section 93 of the Tax Administration Act will use a form called RRA01, which can be completed on e-Filing to increase efficiency and reduce costs for taxpayers.
  • Statement of assets and liabilities provisional taxpayers with business interests are required to declare their assets and liabilities, based on cost, in their tax returns each year. Taxpayers who fall within this category, and with assets above R50 million, are now required to declare specified assets at market values on their 2023 tax returns.
  • Foreign income disclosure – new fields on the return andappropriate source codes have been created for taxpayers who must declare worldwide foreign income from a foreign employer while working in South Africa and/or abroad.
How to ensure a successful 2023 Tax Season

SARS has warned taxpayers to not inflate their expenses and/or under-declare their income to obtain impermissible refunds, as this will make them potentially guilty of fraud. In addition, taxpayers who do not adhere to the deadlines of this year’s Filing Season will face administrative non-compliance penalties.

So, even if you have been auto assessed, it is important to make sure that your return is 100% correct and truthful, and that payments, returns and supporting documents are submitted on time.

You need to make sure that you have received your latest IRP5/IT3(a) and other tax certificates like medical aid, retirement annuity fund, and any other third-party data relevant to determining your tax obligations, and that these are correctly reflected on your auto-assessment or return.

Failing to do so may result in paying more tax than necessary as you might lose on deducting amounts in the determination of your taxable income such as home-office expenses, donations to charities, trade travel expenses, medical expenses paid and contributions to retirement funds and medical schemes.

Given this responsibility, as well as the deadlines and changes that have been introduced this year, obtaining advice and assistance from your accountant is highly recommended for a successful 2023 Tax Season.

Provisional Taxpayers – your first Tax Season 2024 deadline

If you are a provisional taxpayer, your first provisional payment for 2023/4 is due by 31 August 2023.

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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Read more about the article The True Cost of an Employee
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The True Cost of an Employee

“The value of a business is a function of how well the financial capital and intellectual capital are managed by human capital.” (Dave Bookbinder, author)

There are a lot of factors that go into working out the true cost of an employee. According to the US Small Business Administration, employees really cost between 1.25 and 1.4 times their monthly wages.  Understanding why this is, is critical to working out whether the company can really afford to bring someone onto the team. Determining the true cost of an employee helps a company to draw up better budgets, cost products more accurately and ultimately, make more profit. Here are all the things you need to consider before choosing to onboard a new hire.

  • Salary: The monthly wage paid to an employee is usually the base for deciding whether a company can afford to bring them on board. Obviously, the full “Cost to company” monthly wage needs to be taken into account including taxes, UIF and any other built-in components such as equity schemes or medical aid. The salary also includes the cost of leave. All employees are by law allowed to take holidays and days off when they are ill. These are days that you are paying your employee, but not gaining any benefit.
  • Additional employees: When you hire new employees, you may also need to consider hiring other people to manage those people, conduct the hiring process, administer employee disputes and complaints and ensure they are paid timeously each month. While new business owners may find it possible to do this themselves for one or two new employees, this can quickly start taking over in terms of hours, meaning the company owner is no longer doing their own vital job. It is advised that the costs of HR, finance and middle management are therefore looked at separately as this will give you a clearer idea of the ongoing costs for each employee.
  • Onboarding and training: From the minute you start writing the advert for a job posting, the cost of hiring an employee starts to add up. How much time is lost sifting through CVs, conducting interviews and running background checks? Once they are onboard, they will need to be trained on the company systems and rules and will take time to get used to their role. How much time do other employees need to do this rather than their own jobs? Employers should also not expect peak performance right from the beginning and this loss of productivity also has a cost.
  • Equipment: Any employee you hire will need to be given equipment, the cost of which will be determined by your industry. Everything from overalls to laptops and company cell phones as well as desks, chairs and meeting rooms need to be considered. What software do they need installed and how much is the annual subscription? How much office space does each employee take up? What does that space cost you to rent each month? On top of this comes costs like toilet paper, lighting, stationary and even coffee and tea, mugs and cutlery.
  • Overtime, bonuses and promotions: While generally optional, there are some industries where overtime cannot be avoided. As time passes business owners may also want to look at paying bonuses or giving their employees a promotion to ensure they remain happy and productive. These costs also add up and should never be forgotten.

If all of this seems too much to consider, don’t hesitate to contact your accountant who will be able to advise on whether bringing a new employee onboard is right for your business.

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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Read more about the article Tips for Getting out of Business Debt
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Tips for Getting out of Business Debt

“Borrowing isn’t inherently bad; it depends a lot on what the debt is financing” (Stephen Moore, writer and economic commentator)

 Taking on debt can be a good thing for a company. It can fund expansions, help you seize market share or diversify offerings. Handled incorrectly it can, however, lead to severe problems that could ultimately result in bankruptcy. Managing company debt is, therefore, something that should always be done alongside your company accountant, who can advise on whether taking on new debts is possible, whether the debt will pay itself off and how best to keep the payments down. Understanding just how debt works is, however, essential for any business owner and knowing how to pay it off before it becomes trouble is a skill that needs to be nurtured. These are our tips for paying off business debt.

1. Analyse and prioritise

The first step to breaking free from debt is understanding it. By knowing exactly how much you owe and to whom, and the different interest rates and payments involved, you get to take control of that debt. Look at the debts that are the most crippling and which cost you the most in interest each month and target paying these off first. Pay any extra money you have there and in the long run your bank balance will thank you.

2. Cut expenses

No matter how closely you monitor your expenses on a day-to-day basis, there are always items that can be cut to finance debt repayments. Your accountant can help you to analyse your monthly expenses and find areas for improvement. Whether you are making multiple small savings, such as trading to less expensive office coffee, and buying energy saving light bulbs or selling vehicles that aren’t currently utilised, each cent found will make a difference.

3. Shorten your payment cycle

Many businesses operate on an invoicing system which gives clients a certain amount of time to pay for a product or service. The standard amounts are generally 30, 60 or 90 days. While it may be beneficial to clients, having long payment cycles can unnecessarily hurt the supplier. By getting paid sooner, a business is able to maximise the interest it receives on the income, or, in the case of companies with debt, decrease the interest they pay on any loan.

4. Negotiate better debt repayment terms

If your business goes under, your creditors will lose the vast majority of their money. To prevent this from happening, don’t be afraid to approach the banks, or other lenders to renegotiate your payment limits, or interest rates. It is in your creditor’s best interests to ensure you pay (and to keep your business for the future!) so you might be surprised by what they are willing to do when you say you are struggling.

5. Consolidate debt

Depending on how your debt is currently structured and the different interest rates, it may be advantageous to consolidate that debt. Consolidating debt means taking out one large loan with a lower interest rate to cover all the other debts. Doing this can also help pay off your debt faster, as having only one monthly debt payment can feel more achievable than paying off numerous others.

6. Look closely at your pricing

Many people make the mistake of pricing a product based on their costs, plus what profit they hope to make. Accurately pricing a product is about so much more than that though. When pricing your products, you need to take into account the prices being charged by competitors, your true expenses in making that product and what your product brings to the market that is different from your competitors. It is distinctly possible you could be charging more per item, or conversely perhaps you could sell vastly more product if you simply lowered your costs slightly.

7. Diversify

Take a close look at your product offering. Are there things you could add that would be beneficial to existing clients? Getting a new product onto the market that you can upsell as an add-on to already successful products is a great way to generate extra income, which has thus far not been tapped. Diversification is, however, not necessarily just about adding new products to your catalogue.

Take a look at your current clients and your marketing. Are there other markets that might benefit from your product?Using your advertising budget to tap into groups of people who you may not have sold to before, is an excellent way to improve income and pay off that debt.

8. Inventory management

Incorrect inventory management can lead to your company buying too much product, clogging up your storerooms and having things expire on your shelves. Buying too little product can also be a problem as it means you don’t have it on hand when clients come calling and might miss out on sales. Both of these are expensive drains on a company’s accounts and streamlining your inventory and ordering could ultimately save you a significant amount of money.

9. Don’t lose sight of success

In difficult times, companies often make the mistake of cutting back on advertising, or downgrading the business in other ways, by retrenching key staff or not maintaining or upgrading equipment. This thinking will hurt the business in the long run as you lose market share or aren’t able to take advantage of new opportunities. Remember if your profits grow, it will be easier to pay old debts.

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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Read more about the article SARS Warning: Beware Scam Emails!
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SARS Warning: Beware Scam Emails!

“The backbone of any successful phishing attack is a well-designed spoofed email or spoofed website, which is why it pays to have a healthy level of scepticism when it comes to opening emails and visiting websites.” (Phishing.org)

With Tax Season 2023 upon us, expect an upsurge in scam emails, seemingly from SARS but actually clever attempts by online criminals to swindle you.

“Phishing” is a cyberattack that uses fraudulent emails made to look as if they come from a reputable source – such as SARS – to trick people into disclosing sensitive personal information or taking an action such as clicking on a link that installs malware on their systems.

While fraudulent SMSs “smishing” and phone calls or “vishing” are also used, email “phishing” is the preferred method.

Examples from SARS include emails that appear to be from returns@sars.co.za or refunds@sars.co.za, notifying taxpayers that they are eligible to receive tax refunds or owe SARS money.

One of the most recent scams involves an email titled ‘eFiling Credit Request’ that asks the email recipient to click on a link to view the amount. Another scam email titled ‘Debt Management – Final Demand’ guides the email recipient to download a ‘statement of account’. New scams are popping up all the time – for examples see SARS’ Scams and Phishing webpage.

These emails contain attachments, icons or links to false forms and fake websites made to look like the SARS website, to fool people into entering personal information or sharing one-time pins (OTPs).

Those caught by phishing often suffer financial loss as well as psychological trauma, while some may be unaware that they are victims of crime. It may also result in a breach of a company’s data security, as employees often use their work email addresses to sign up to websites and email lists.

SARS’ advice to safeguard yourself
  • Do not open or respond to emails from unknown sources. Beware of false SMSs.
  • Beware of emails that ask for personal, tax, banking or eFiling details such as login credentials, passwords, pins, and credit or debit card information.
  • SARS will not send you any hyperlinks to other websites – not even those of banks.
  • SARS will never request your banking details in any communication that you receive via post, email, or SMS. However, for the purpose of telephonic engagement and authentication purposes, SARS will verify your personal details.
  • SARS does not send *.htm or *.html attachments.
  • SARS will never ask for your credit card details.

Remember never to click on links in a suspicious email from SARS. You can email suspicious SARS correspondence to phishing@sars.gov.za. You can also check here to see all current legitimate SARS surveys, emails and SMSs.

Check with your accountant

While protecting yourself against scammers, it remains crucial to ensure that all legitimate SARS correspondence to you is still promptly attended to. If you are in any doubt, it is best to check with your accountant, who will be able to verify if the request is from SARS or report fraudulent emails to the relevant authorities. That way, you are certain you are complying with your tax responsibilities, without ever falling prey to scams and fraudsters.

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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Your Tax Deadlines for August 2023

  • 7 August – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 30 August – Excise Duty payments
  • 31 August – Value-Added Tax (VAT) electronic submissions and payments, CIT Provisional payments where applicable, first provisional tax payment (individuals).

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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Read more about the article Ten Often-Overlooked Ways Your Accountant Can Help Your Business
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Ten Often-Overlooked Ways Your Accountant Can Help Your Business

“If you talk to a top accountant about his field of expertise, it’s mind-boggling.” (Vincent Kompany, professional football manager and former player)

Accountants are the tax and compliance champions of any industry, but the best ones do so much more for their clients, as strategic advisors and trouble-shooters who can also assist with automating a variety of tasks and pave the way for the running of a smooth and profitable business. Here is a list of not-so-obvious services an accountant can assist with that will help your business thrive.

1. Setting up a new business

Setting up a new business comes with a number of potential pitfalls that may not be discovered until it’s too late. For instance, the type of business you choose to set up, be it a company, sole trader, trading trust or partnership will come with different tax requirements, paperwork and personal liabilities. Changing the kind of business vehicle at a later stage can be a costly process, so having an accountant assist you in ensuring you are starting off with the best entity for your business could make a huge difference.

2. Buying or selling a business

If you are thinking of either selling your business or buying a new one, your accountant should be your first stop. Accountants can assist with business valuations, form exit strategies, and get the right financial reports and documents together to ensure you only make good decisions. Your accountant will also help keep costs down and make sure you don’t find yourself on the wrong end of a bad deal.

3. Cash flow adjustments

One study performed by Jessie Hagen of U.S. Bank revealed that 82% of businesses fail because of poor cash flow management. There is, therefore, no doubt that not being able to meet financial obligations when you need to is certainly an indicator that things are not going well. The good news is that your accountant can help.

By conducting a thorough business analysis, your accountant may be able to rebalance your budget and debts, optimise your cash flow and build cash flow projections.  By simply showing you what needs to be paid when, organising cash reserves, and adjusting the way money is used in the business, you can avoid upsetting suppliers and staff and ensure your business operates as smoothly as possible.

4. Business operations

There are many decisions in a business that look like they may be simple, but the fact that they involve an element of finance makes them a critical task to take to your accountant. Accountants can help with analysing whether your equipment should be bought, or leased, whether offices should be rented and where, and whether the terms and conditions offered by one supplier are truly better than those of another.

Your accountant is also best suited to assist in pricing your products to make sure you are getting the most profit from each sale and maximising your potential client base. They will also be able to point to areas of under-performance in the business and suggest possible areas for expansion.

5. Cloud software

Your accountant is also able to help you automate much of your business’s monthly bookkeeping and set up an invoicing system that will tell you at a glance who has paid and who has not. This smart software can even send emails to clients to chase up unpaid invoices, all of which saves you time and keeps you on top of your finances.

6. Networking

Good accountants work with other good businesses. If you are looking for suppliers or even investors it can never hurt to chat to your accountant about what you need – you never know, perhaps they know the right person?

7. Securing financing

At some stage in every successful business’s life, there will probably come a time when additional finance is necessary. Whether it’s securing a loan that helps bridge tough times, or attracting investors for necessary expansion, getting this money will need well-structured and legible financials.

Your accountant is therefore the first person you should speak to. They can help you structure your investment pitches and loan applications in a way that investors prefer, showcasing your business and making your investment-seeking efforts more likely to succeed.

8. Stock management

It isn’t always easy to tell on a day-to-day basis if your stocks are being managed correctly. Fortunately, your books will reveal a lot to your accountant about what’s happening in your stock room. Are you ordering too much, and therefore spending too much on storage, or writing off a high percentage of obsolete or expired goods? Or is the opposite true and you are missing out on sales by not having the correct parts or products in store? Your accountant can look at the trends over time and reveal what changes need to be made to ensure you are operating at peak efficiency.

9. Long-term planning

An accountant can put long-term plans in place, which will ensure loans are paid off as efficiently as possible, staff are taken care of as well as possible within the business’s means, and that its systems and resources are set up to ensure the inevitable difficult times are as painless as possible.

10. Advice

Your accountant will no doubt be working with a number of other businesses in numerous different sectors. They may therefore be able to see the bigger picture. This together with their wealth of experience in business operations and in seeing where things have gone right and wrong in the past, makes them the ideal people to ask for advice or even get onto your board. Accountants will be able to help you make the right decisions to grow your business, pay off debt or point you in the best direction when you are struggling with a tough decision.

Ultimately, your accountant is so much more than simply your “tax guy”. By assisting you in every facet of your business your accountant can help you avoid a variety of frustrations and troubles and help you build a successful, well-oiled and streamlined business.

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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Directors: Prepare and Submit Your Company’s Beneficial Ownership Register

“The lack of adequate, accurate and up-to-date beneficial ownership information facilitates money laundering and terrorist financing by allowing criminals to hide their true identities, and the true purpose and/or source or use of funds.” (Financial Intelligence Centre – FIC)

South Africa’s grey listing by the Financial Action Task Force (FATF) earlier this year and the subsequent passing of the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022, resulted in amendments to the Companies Act, among others.

The changes to the Companies Act mean that company directors are now obliged to implement a detailed beneficial ownership register for their companies and submit the register to the Companies and Intellectual Property Commission (CIPC), along with a list of supporting documents. Such a register must also be kept up-to-date and verified annually.

Who must file a beneficial ownership register?

The vast majority of private companies must file a beneficial ownership register, but there are some complicated issues at play here and you would be well-advised to check with your accountant as to exactly what your company’s obligations are in terms of these new rules.

What are the penalties?

Failure to comply with the provisions relating to the beneficial ownership register requirements is an offence in terms of the Companies Act. A compliance notice may be issued in cases of non-compliance and an administrative penalty may be imposed.

What are the deadlines?

Entities incorporated before 24 May 2023 will be required to file the records of their Beneficial Interest Register as part of their Annual Returns filing process from 24 May 2023, the date of publication of the final Amended Companies Regulations.

Entities incorporated after 24 May will be required to file the records of their beneficial ownership within 10 days after incorporation.

What is required?

The beneficial owners of a company must be identified, their information collated and a register containing this information must be filed with CIPC.

A “beneficial owner” in respect of a company, means an individual/natural person who directly or indirectly, ultimately owns 5% or more of that company, or exercises effective control of that particular company, including through:

  • The holding of beneficial interests in securities of that company.
  • The exercise of, or control of the exercise of the voting rights associated with the securities of the company
  • The exercise of, or control of the exercise of the right to appoint or remove members of the board of directors of that company.
  • The holding of beneficial interest in the securities, or the ability to exercise control, including through a chain of ownership or control of a holding company of that company.
  • The ability to exercise control, including through a chain of ownership or control of a juristic person other than a holding company of the company, a body of persons corporate or unincorporated, a person acting on behalf of a partnership, a person acting in pursuance of the provisions of a trust agreement; or
  • The ability to otherwise materially influence the management of that company.

For each beneficial owner identified, the following information is required:

  • Full names, ID number or passport number with date of birth, or registration number
  • Business or residential and postal address
  • Email address
  • Confirmation as to the participation and extent of the beneficial interest.

All this information must be collated in a register that provides indexed access to all relevant entries for any one person. In addition, the information must be treated as confidential and adequate precautions must be made against theft, loss, damage, destruction and falsification.

This register must then be kept up to date, with changes updated with CIPC as soon as practical, but no later than 10 business days after notification.

This register must be lodged with CIPC through an online process detailed in a 16-page Guide, along with a list of supporting documents that must be uploaded. An updated register must also be submitted with the Annual Returns each year.

Great advice for trouble-free filing

While it remains the responsibility of the directors of companies and members of close corporations, as part of their due diligence and governance duties, to ensure beneficial ownership filing is facilitated as and when applicable, the assistance of an accountant is highly recommended, given the complexities, the tedious processes and ongoing maintenance requirements, as well as the risk of non-compliance, which constitutes an offence and may incur administrative penalties.

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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How to Prepare for a Possible Electricity Blackout

“Eskom plays a critical role in the life of South Africa, and life of South Africans. Due to its important role in the economy, its inability to provide electricity on demand and on time is a crisis.” (President Cyril Ramaphosa)

The South African Reserve Bank’s Financial Sector Contingency Forum (FSCF) has recently encouraged South African businesses to develop plans for operation at stage 8 load-shedding levels and a total countrywide blackout. While it has tempered this warning by saying that total blackout is an improbable scenario (with a chance of 0.1% to 1% of happening), it’s not an impossible one. The FSCF does however, think that businesses would be prudent to prepare nonetheless, particularly given the very real possibility of load-shedding levels that could see power being shut off for 12 hours a day or more. Here is how businesses can make that happen.

Analysis

The first step is for your business to analyse exactly how a critical power failure or extended loss of power would impact you. Would it be a shutdown of production or a loss of e-commerce sales? Would information loss be important, or do you still need to communicate with clients? Understanding this will inform the rest of the process.

Plan financially

Talk to your bank, investors and insurance companies to fully understand what can be done at the moment of shutdown to ensure continued operations and put risk financing in place to make sure you can cover costs in the event of grid collapse. If you have insurance, you need to know if they cover blackouts and what you need to do when that occurs to ensure they provide assistance. Make sure you have a hard copy of the policy accessible even when the power goes out. We are no longer at the stage where blackouts can be considered “unforeseen”, which means your insurer will have requirements for your preparation in such an event if you expect them to pay out.

Backups

Set your computers to autosave and back up all necessary information to the cloud regularly.

Alternate Power Sources

While it may not be feasible to run the whole business on alternate power indefinitely, you should at least provide UPS units at key positions such as Wi-Fi to ensure that when the power goes out you can still save the necessary work, run billing, or ring up customer sales. Also turn off and unplug all sensitive equipment so that the surge of returning power does not damage equipment.

Security

In the event of a total collapse, businesses may be wiser to shut down entirely. With both fires and crime expected to dramatically increase at that time it’s important to prepare an evacuation plan for your building or factory and shut off all electricity points at the mains. Ensure your property is safe, even when electric fences and CCTV are off.

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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Is Your Information Safe With SARS?

“Confidentiality of taxpayer information has always been a fundamental cornerstone of tax systems… taxpayers need to have confidence that the often-sensitive financial information is not disclosed inappropriately, whether intentionally or by accident.” (Organisation for Economic Co-operation and Development – OECD)

The confidentiality of taxpayers’ information has recently come under the spotlight in South Africa. This was first sparked by a public statement from SARS earlier this year on the tax compliance status of President Cyril Ramaphosa and two related entities.

“In taking this exceptional step to disclose the tax status of the President, with his written consent, SARS would also encourage other high profile political office bearers and leaders in society to consider taking this proactive step as part of their commitment to transparency,” SARS Commissioner, Edward Kieswetter, said at the time.

This was followed by a recent Constitutional Court ruling concerning tax confidentiality and the right of access to information, relating to a request under the Promotion of Access to Information Act (PAIA) to access certain tax records of former President Jacob Zuma (Arena Holdings and others v SARS and another).

The court found that certain provisions of PAIA, as well as the Tax Administration Act (TAA), are constitutionally invalid, and ordered SARS to reconsider the request to disclose taxpayer information, taking into account certain issues.

While this re-evaluates the previous absolute confidentiality of tax records – and affects every taxpayer in South Africa – SARS says that the judgment does not set aside the tax confidentiality provisions for the information it collects.

What information can SARS collect?

SARS has access to a wide array of sensitive information about both businesses and individuals, and it has long been accepted that the confidentiality of this information is paramount.

Taxpayer information is defined in the TAA as any information provided by a taxpayer or obtained by SARS in respect of the taxpayer, including biometric information. SARS draws on available data from statutory declarations by taxpayers, data from third party providers as well as other sources.

In addition, not providing sensitive financial – and even extremely personal – information to SARS is not an option.

According to the TAA, it is a criminal offence for a person to wilfully and without just cause refuse or neglect to:

  • furnish, produce or make available any information, document or thing, excluding information requested under section 46(8)
  • reply to or answer truthfully and fully any questions put to the person by a SARS official
  • take an oath or make a solemn declaration
  • or attend and give evidence

as and when required in terms of the Act.

Furthermore, taxpayers are legally obliged to disclose the information required to discharge the burden of proof, and to ensure access for SARS to certain records at all times.

By not complying with these provisions, a taxpayer is guilty of an offence and, upon conviction, is subject to a fine or to imprisonment for a period not exceeding two years.

What about POPIA and PAIA?

The Protection of Personal Information Act (POPIA) gives effect to the constitutional right to privacy and protects citizens from harm by protecting their personal information. However, POPIA does not apply to an obligation imposed by law or where legislation is enforced concerning the collection of revenue. A taxpayer is thus legally obliged to disclose relevant information requested by SARS.

So, for example, SARS may request medical history information or details about retirement funding contributions to allow a rebate claimed by a taxpayer. Similarly, SARS may have to exchange taxpayers’ information with other tax authorities where double taxation treaties apply.

PAIA creates a framework for the mandatory protection of records that generally contain information “deserving of protection”. Section 35 of PAIA protects all taxpayer information and provides mandatory protection for certain SARS records from third party requests.

However, this will change following the Constitutional Court ruling that sections of PAIA providing absolute taxpayer confidentiality are constitutionally invalid. Until this is remedied, mandatory disclosure in the public interest must be considered by SARS where: the disclosure will reveal evidence of a substantial contravention of or failure to comply with the law; or reveal evidence of an imminent and serious risk to public safety or the environment; and if the public interest in making the disclosure clearly outweighs the harm.

What protection is available for taxpayers’ information?

To protect taxpayer information, every SARS official takes an oath or makes a solemn declaration to comply with the statutory confidentiality provisions and is legally required to treat taxpayer information with the utmost confidentiality and not to disclose it. A breach of these confidentiality provisions is a criminal offence in terms of the TAA.

In addition, the TAA prohibits SARS from releasing taxpayer information unless the disclosure falls within an exception to the general rule that safeguards taxpayer information, expressly provided for in the TAA, which includes divulging taxpayer information:

  • to certain persons and entities identified in the TAA like the South African Police Service or the National Prosecuting Authority
  • to administer a Tax Act
  • to comply with a court order
  • where a taxpayer gives written consent [as in the case with President Ramaphosa]
  • or if another act expressly overrides the TAA confidentiality provisions, such as the Financial Intelligence Centre Act and the Prevention of Organised Crime Act.

In addition, while the Constitutional Court decision declared sections of the TAA and PAIA unconstitutional, it does not set aside the tax confidentiality provisions. It does, however, limit absolute confidentiality.

A high threshold must still be met when access is requested to the tax records of a taxpayer and there are “formidable substantive and procedural hurdles” to overcome before a taxpayer’s information may be disclosed. Even where permitted by law, before divulging taxpayer information, SARS must consider the purpose for which the information is being requested, how it will be used and how it will be protected.

Subsection 70(5) of the TAA further provides that such disclosure may be made only to the extent that it is necessary, relevant and proportionate to exercise a legislative function or duty.

A taxpayer distressed by a decision that grants access to tax records has recourse available, such as an internal appeal, a complaint to the Information Regulator, or an application to the High Court.

Ensure compliance, while only providing relevant information

The information that can be requested by SARS is not limited to what is requested during a formal investigation or audit – it could be a request for information for any purpose related to the administration of a tax act.

However, SARS may only request relevant information related to and within the ambit of the administration of tax acts. So, for example, information requested about income tax must be related to the Income Tax Act. Existing case law further indicates that relevancy is tested by whether the information directly proves or disproves the issue at hand.

Disputing a request from SARS for relevant information will be costly and futile, however, taxpayers can contest an unreasonable request for information.

This means that the advice and assistance of your accountant is indispensable when dealing with requests for information from SARS, and in ensuring that only necessary, relevant and proportionate information is provided, as well as to ensure your information is protected as dictated by law.

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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Read more about the article Your Tax Deadlines for July 2023
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Your Tax Deadlines for July 2023

  • 7 July – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 28 July – Excise Duty payments
  • 31 July – 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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How to Use AI to Improve Your Small Business

“The amount of work we can automate with AI is vastly larger than before. As leaders, it is incumbent on all of us to make sure we are building a world in which every individual has an opportunity to thrive.” (Andrew Ng, Co-founder and lead of Google Brain)

Artificial Intelligence has come a long way very fast, and now every second app is claiming to be able to change your life using this ground-breaking technology. Many of these apps are simple software solutions designed to automate routine tasks, sometimes while mimicking a level of human interaction – as in chatbots, and the aim is to use them to free up human focus for more important, strategic or engaging activities, which cannot be mimicked. The truth is that many of these apps are only able to offer services at a fraction of the skill of a human new to the job, or still require significant human knowledge or input to get the most use out of them.

There are, however, some apps out there where this assistance is more than just a little valuable, particularly for a new company that may have no staff at all in a specific role, or where an entrepreneur may simply not have the time to do everything themselves. Here then, is a list of ways you can use current AI to improve your small business.

Customer service

Probably the most common use for Chatbots is the spreading of content marketing on social media. Many people are familiar with these fake profiles popping up to link to various services or leave comments defending various points of view. While at one time there may have been a benefit to such marketing this is rapidly reaching its climax as people become more savvy to the existence of these tools and online bots now seem to outnumber actual people online.

A far more interesting use has been in customer service where bots are being deployed as a first line of assistance to clear the bulk of customer questions before they take up the time of real members of staff.  Sold as being capable of mimicking a human conversation, business owners should, nonetheless, never fool themselves that modern chatbots are coming across as real staff members. People are, however, becoming increasingly comfortable with having their questions answered by an automated service, and chatbots in this scenario can help free up time by becoming an interactive FAQ. The benefit to a small business owner is that their time is no longer cluttered with routine enquiries and response times to customers are now rapidly sped up, lowering frustration and improving real world relationships. They can also be set to send you notifications to alert you to serious cases, or issues that only humans can resolve.

Among the best AI chatbot programs are Netomi, WP-Chatbot, Microsoft Bot Framework and of course (the one getting all the media attention!) ChatGPT.

Cybersecurity

Cybersecurity is an increasingly important and regulated aspect of modern business. Doing business these days requires that companies have top of the line security with no flaws in order that they meet the legal requirements for protecting customer information and data. In the past, they would just ignore it and hope for the best, but fortunately this no longer has to be the case.

The days of constantly needing to upgrade and deploy security software, learning new skills and manually backing up servers to prevent malware, ransomware and phishing attacks could now be now a thing of the past. AI solutions save business owners time and give them peace of mind by handling all of that, ensuring companies are safer than they have ever been.

But it doesn’t stop there. In a world where hackers are able to bypass common virus protection programs with little effort, and the average ransomware pay out sits at around R2-million, AI security is also capable of analysing networks for weaknesses and vulnerabilities, and spotting abnormalities in user behaviour. These AI security systems are also capable of using their database of previous malware versions to predict and prevent future attacks based on patterns and commonalities.

These security solutions are also able to monitor staff behaviour on the company network, and over time learn normal patterns of behaviour. By identifying the usual patterns, it can quickly recognise if one of your staff members has an account that has been compromised and shut it down before it can be used to cause any damage. Just be careful of privacy concerns before implementing any such solution in the workplace.

All of this helps keep the small business up to date with regulations, and customers safe, while preventing costly downtime and giving owners peace-of-mind.

While there are literally dozens of useful and important security apps some of the best AI Cybersecurity solutions include IBM Security, Targeted Attack Analytics by Symantec and Tessian.

E-Commerce

Online shopping is only getting more embedded in our society and small businesses often have a long way to go to keep up with the Amazons of the world when it comes to their level of operations. Luckily, AI can now be used to automate or assist with a variety of tasks such as product recommendations (Clarifai), listing optimisation (Klevu) and inventory management (Inflow Inventory) while also analysing customer behaviour and personalising the shopping experience (Amazon Personalize). All of this can save the business owner time, and lead to a richer, more satisfying experience for customers, which in turn leads to improved sales and better client retention.

Financial Management

One of the most arduous, but also necessary, tasks for small business owners is the management of all financial affairs. Luckily, financial management software has been around for a while and the very best solutions are all incorporating AI to automate bookkeeping tasks, reconcile bank transactions and generate reports.  While they are by no means a replacement for an accountant who can help with advice, compiling complete financials and assisting with tax savings, both Xero and Quickbooks, for example, have AI apps that can help ease the burden of your day-to-day, time-intensive bookkeeping tasks.

There are even apps that help small businesses stay up to date with regulatory requirements. Compliance.ai for instance will monitor and analyse regulatory changes, automate compliance tasks, and generate reports reducing penalties and other non-compliance risks – even in South Africa.

Take specific advice from your accountant!

Don’t implement any AI solution without first running it past your accountant, particularly when it comes to the financial management aspect. There is still no substitute for specific (human) advice tailored to address your particular needs.

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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New Trustee Duties: More Admin, Impossible Deadlines and Hefty Penalties

“A trustee has a responsibility to guard the assets of others with a higher degree of care than he does his own.” (John Ashcroft)

Onerous new duties have recently been imposed on all trustees of all trusts – by government through legislative amendments, and also by SARS – in addition to their existing fiduciary duty to act in the best interest of all the beneficiaries and “with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another”.

The legislative amendments follow South Africa’s grey listing by the global financial watchdog, the Financial Action Task Force, and the subsequent changes to the Trust Property Control Act (TPCA) and the Financial Intelligence Centre Act (FICA), among others.

The new trustee duties will require extensive and time-consuming additional administration, and have impossible deadlines, while non-compliance can result in hefty penalties. This makes professional trust administration assistance crucial for trustees, now and in the future.

Who is affected?

All trustees – not only independent trustees – are affected by the imposition of these new trustee duties.

In addition, all trusts are affected, regardless of the nature of the trust or the value of the assets in the trust, including family trusts, commercial and business trusts as well as public benefit trusts. Not even dormant trusts are specifically excluded.

The new regulations will also affect companies that provide services to trusts. Under FICA, the scope of ‘accountable institutions’ has recently been expanded to include trust service providers, company service providers, legal practitioners, crypto asset service providers, and clearing system participants, among others. These accountable institutions must conduct customer due diligence on their clients, including verifying identities, assessing the risk of illicit activities, and reporting suspicious activities. This will require significant resources, time and expertise from both trustees and accountable institutions.

What are the new duties and deadlines?

The legislative changes to the TPCA have given rise to trustee duties relating specifically to beneficial ownership registers and records of accountable institutions. In addition, SARS has issued new reporting requirements.

  1. Updated beneficial ownership registers – trustees are now required to collect, record and maintain detailed information and specific records of the beneficial owners of the trust – who are now far more broadly defined to include founders, trustees, beneficiaries, donors and protectors. In addition, trustees must lodge a register of the prescribed information with the Master’s Office, with only a trustee or a person with power of attorney allowed to use the Master’s portal to do so.
  2. Updated records of interactions with accountable institutions – trustees are now required to collect, record and maintain details pertaining to accountable institutions with which trustees have dealings, including, for example, accountable institutions acting as agents to perform trustee functions and accountable institutions providing any services to trustees. As noted, the definition of “accountable institutions” has also widened considerably.
  3. Submitting an IT3(t) for each beneficiary – SARS recently issued a draft notice requiring trustees to submit an IT3(t), which provides details of any amount vested in a beneficiary including income (net of expenditure), capital gains and capital amounts distributed by the end of September so that beneficiaries’ tax returns can be pre-populated.
What are the penalties?

Failure to comply with the obligations as contained in the TPCA is an offence and, on conviction, trustees are liable to a fine not exceeding R10 million, or imprisonment for a period of five years or both.

Trustees are already non-compliant with the TPCA, as the new regulations were published after business hours on Friday 31 March 2023 and became effective on the next day, Saturday 1 April 2023. This means that trustees were simply unable to comply with the regulations by the deadline, both due to the timing of the gazette and delays in establishing the requisite online electronic register on the Master’s ICMS Web Portal.

SARS’s IT3(t) deadline seems more doable, but in reality, the 30th of September is not that far away. Various stakeholders are submitting comments regarding the implementation of this requirement to submit an IT3(t) for each beneficiary, but probably no more than a delay could be expected.

Considering the extent of the new duties, the deadlines, and the hefty penalties involved, trustees are certainly well-advised to seek professional assistance to comply with these additional obligations and to ensure compliance.

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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When to Say No to an Opportunity (or a “Barnacle”)

“The difference between successful people and really successful people is that really successful people say no to almost everything.” (Warren Buffet, Investor)

Anyone who has ever started a business knows the feeling a new enquiry can generate. The excitement that things seem to be working, may make the new entrepreneur set aside their concerns and leap at any opportunity. The sad news is that this excitement to help anyone who asks could be diluting the brand, lowering the quality of output and even damaging the business’s ability to grow. Here are the signs it may be time to say no to an opportunity.

When you don’t have the capacity

Your hours are stretched as it is, but now a potential new client has come calling and you are determined to make it work. In the early days clients are a lifeline to a business, but there will come a point where taking on new responsibilities could see you dropping the ball when it comes to your other clients. With each new arrival, it is therefore important to carefully analyse your resources, and options and determine whether you can truly do justice to their needs, and those of your other clients, with the capacity you have. If you can’t, and you try, then you will only end up damaging your reputation for good work and harming your business in the long run.

When you don’t have the skills

Knowing what you can’t do is as important as knowing what you can do. Don’t assume you will learn as you go. Taking on work under your brand banner that you are incapable of delivering will be a death knell to your business.

When the long-term cost outweighs the short-term benefit

A new client has come in with a promise to pay you more money than you have ever seen for the next three months, but they need you to drop your other clients to do it. This is a perfect example of short-term gain being outweighed by long term benefit. Sure, these next three months will be good, but those clients you currently have won’t come back and worse, will tell others that you dropped them. Six months down the line, the new client’s money will be gone along with your original clients.

It’s not making financial sense – saying no to “barnacles”

Traditionally, it is thought that loyal customers are the heartbeat of a business, but increasingly studies are finding that businesses need to ask their accountants to regularly evaluate the value versus effort that these loyal clients are bringing to the business. Harvard business review suggests that some “loyal customers” may in fact be using more of your resources for less of your profit, preventing you from servicing other potentially more lucrative clients. These customers who use up your resources, perhaps through continued complaints, returns for changes, or negotiations for better prices, are referred to as “barnacles” and like barnacles on a ship they can slow down your business growth. Sometimes it might be better to have a frank discussion with these customers to see whether your business still fits their needs rather than simply saying yes to everything they ask, because they have been loyal.

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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Can the R&D Tax Incentive Benefit Your Business?

“The government expects that, by encouraging companies to undertake R&D in South Africa, local companies will strengthen their capabilities of developing value-added products, technologies and services.” (Department of Science and Innovation (DSI) – South Africa)

Research and development (R&D) is essential to boost innovation in the business sector, as it improves the capability to develop new products and processes and to improve existing ones. This is crucial for improving competitiveness and growth of the South African economy.

Section 11D of the Income Tax Act offers a R&D tax incentive to promote private sector R&D investment in South Africa. In the following paragraphs, you will find out what the incentive offers, which companies qualify, and the terms and conditions that apply.

What does the R&D incentive offer businesses?

Section 11D allows R&D spending to be considered when determining taxable income in two ways:

  1. A deduction equal to 150% of expenditure incurred directly for R&D; and
  2. An accelerated depreciation deduction (50:30:20) for capital expenditure on machinery or plant used for R&D.

According to the DSI, the tax deduction will help to reduce the cost of R&D, which will enable companies to finance their R&D and scale up or undertake R&D activities sooner than otherwise.

Which companies can benefit from the R&D incentive?

To be eligible, a company must be an incorporated entity and recognised as a company under the Income Tax Act. Individuals, non-profit organisations and trusts are not eligible.

As the aim is to encourage South African companies to invest in R&D, the incentive is available to businesses of all sizes and in all economic sectors.

Companies can also claim a deduction of R&D it outsources to another company, or to a South African university or science council. Companies in joint ventures (JVs) can claim to the extent that they fund the R&D. Prototypes and pilot plants created solely for purposes of R&D are also eligible.

However, where a company receives funding from government, a public entity or a municipality towards its R&D activities, this funding will be excluded when the R&D tax deduction is calculated.

What are the terms and conditions?
  • The R&D activities must be approved by the Minister of Science and Innovation on recommendation by the R&D Tax Incentive Adjudication and Monitoring Committee that evaluates applications and reviews the annual progress reports that must be submitted.
  • The R&D expenditure claimed should be incurred directly and solely for R&D undertaken in South Africa, and in the production of income and the carrying on of any trade.
  • R&D expenditure claimed should be incurred after the date the application is submitted to the DSI.
  • Applications awaiting approval should not be included in provisional tax calculations to avoid penalties. Where approval is received after a tax assessment has been finalised, a Request for Correction can be made.
  • There is an extensive list of exclusions and limitations.
  • Since last year, applications and progress reports can only be submitted via the new online automated system.
  • According to the 2023 Budget Review, government is refining the R&D incentive to make it simpler to understand and administer.

Before claiming the R&D tax incentive against taxable income, and certainly before commencing any R&D activities in reliance on the tax incentive being allowed, ask your accountant to confirm that you can benefit optimally from this substantial incentive, while meeting all the 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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Read more about the article Your Tax Deadlines for June 2023
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Your Tax Deadlines for June 2023

  • 7 June – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 29 June – Excise Duty payments
  • 30 June – End of the 1st Financial Quarter
  • 30 June – 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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How You and Your Business Can Benefit from SARS’ Solar Tax Breaks

“The lack of reliable electricity supply is the biggest economic constraint… I am pleased to announce two tax measures to encourage businesses and individuals to invest in renewable energy and increase electricity generation.”(Finance Minister Enoch Godongwana – Budget 2023)

In the 2023 Budget, the lack of a reliable electricity supply was highlighted as the country’s biggest economic constraint. South Africans have been subjected to loadshedding every day of 2023, often at stage four, five or six. Recent research by the Bureau for Economic Research revealed more load-shedding in the first two months of 2023 than in all of the previous four years. It is a situation expected to deteriorate even further as demand rises with the winter months approaching.

To encourage businesses and individuals to invest in renewable energy and to increase electricity generation, government announced two tax measures in the 2023 Budget in February. The first will provide R5 billion in tax relief to companies through an expansion of the renewable energy incentive, and the second will provide R4 billion in tax relief for households that install solar panels. Both entail a number of conditions and requirements, as well as tight timelines, which are summarised below.

The expanded tax incentive for businesses

To encourage rapid private investment to alleviate the energy crisis, this is a temporary expansion of the existing tax incentive Section 12B of the Income Tax Act, which provides for capital expenditure deductions for assets used in the production of renewable energy.

It originally allowed businesses to deduct 50% of the costs in the first year, 30% in the second and 20% in the third for qualifying investments in wind, concentrated solar, hydropower below 30 megawatts (MW), biomass and photovoltaic (PV) projects above 1 MW, and provided an accelerated capital allowance of 100% in the first year for solar PV energy projects of less than 1MW.

This incentive has now been temporarily expanded as outlined below.

Highlights of the expanded incentive

  • Under the expanded incentive, businesses will be able to claim a 125% deduction.
  • Moreover, that deduction can now all be claimed in the first year.
  • Businesses will be able to reduce their taxable income by 125% of the cost of renewable energy assets used for electricity generation.
  • The adjusted incentive will only be available for investments brought into use for the first time between 1 March 2023 and 28 February 2025.
  • The deduction applies to all renewable energy projects.
  • There will be no thresholds on the generation capacity size of the projects that qualify.
  • The expanded incentive is only available for two years from 1 March 2023 to 28 February 2025 to stimulate investment in the short term.

Example: business renewable energy tax incentive

For businesses with a positive taxable income, the deduction will reduce tax liability. For example, a renewable energy investment of R1 million would qualify for a deduction of R1.25 million against taxable income.

Using the current corporate tax rate (27%), this deduction could reduce the corporate income tax liability of a company by R337,500 in the first year.

Tax rebate for individuals

This is a new tax incentive available for a very limited period to encourage individuals to install rooftop solar panels to increase electricity generation and reduce pressure on the grid. Individuals can claim the rebate against their personal income tax liability.

Highlights of the individual tax rebate
  • This incentive will be available for one year between 1 March 2023 and 29 February 2024.
  • Individuals who install rooftop solar panels will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15 000 per individual.
  • The rebate can be used to reduce tax liability in the 2023/24 tax year. PAYE taxpayers can claim the rebate on assessment during the 2023/24 filing season, while provisional taxpayers can claim the rebate against provisional and final payments.
  • There is no ownership limitation, so installations by either landlords or renters are eligible, but only the party that pays for the solar panels can claim the rebate.
  • The rebate applies only to new and unused solar PV panels with a minimum capacity of 275W per panel (design output), installed as part of a new system, or as an extension of an existing system, which must be connected to the mains distribution of the residence (i.e. no off-grid installations qualify).
  • The rebate is only available for solar PV panels (excluding portable panels), and not for other components of a system such as batteries, inverters or fittings. Installation costs do not qualify.
  • The solar panels must be purchased and installed at a private residence used mainly for domestic purposes (i.e. dual-use residences such as a guest house or Airbnb used more than 50% for trade, will be excluded).
  • A certificate of compliance for the installation must be issued between 1 March 2023 and 29 February 2024 and the certificate must confirm the date the solar panels purchased were brought into use for the first time.
  • To claim, taxpayers will need a VAT invoice that indicates the cost of the solar PV panels separately from other items, along with proof of payment.
  • There will be no recoupment if the residence is sold after claiming the rebate, but there will be a claw-back if the panels themselves are sold within one year.
  • SARS has issued draft third-party regulations for comment that will require solar installers to report to SARS the complying installations they have completed together with the details of the purchaser.
  • Like other rebates, it may only be claimed against tax payable and only to reduce the tax payment to nil. If the tax payable is less than the rebate, the balance is forfeited.
Example: tax rebate to individuals

An individual who purchases 10 solar panels at a cost of R40,000 will be able to claim 25% of this R40,000 cost – or R10,000 as a rebate. This means that the individual’s personal income tax liability that is payable for the 2023/24 tax year can be reduced by R10,000.

Another individual who buys 20 panels at a cost of R4,000 per panel, will have invested a total of R80,000. The calculation of 25% of R80,000 amounts to R20,000, but only R15,000 can be claimed against income tax liability for the 2023/24 tax year, as the deduction is limited to R15,000 per individual. If the tax payable is less than R15 000, the rebate is reduced to the amount of tax payable. The balance of the rebate is thus forfeited.

Given the many conditions and requirements, as well as the tight timelines, professional tax advice is recommended before installing solar power or renewable energy alternatives, to ensure the full benefit of these time-limited tax incentives can be realised.

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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Affordable Ways to Reap the Benefits of Engaged Employees

“Always treat your employees exactly as you want them to treat your best customers.” (Stephen R. Covey)

Gallup describes “engaged employees” as those who are involved in, enthusiastic about, and committed to their work and workplace. Numerous studies over many decades have confirmed the benefits of engaged employees especially to smaller companies, where they are often required to take on many diverse responsibilities.

Many studies have also identified employee engagement strategies that have proven most meaningful to employees and are therefore most effective. In these difficult economic times, business owners and managers will be pleased to find that some of the most effective employee engagement strategies do not require a substantial cost.

The many benefits of engaged employees

This isn’t just hype. Studies have confirmed that –

  • Engaged employees often go beyond the call of duty.
  • Employee engagement is positively correlated to company growth rates.
  • Improved employee retention and loyalty.
  • Lower absenteeism rates.
  • Higher productivity – some studies have found engaged workers to be up to 21% more productive.
  • Improved customer satisfaction.
  • Improved company reputation and overall stakeholder value.
  • Reduced incidence of internal theft and fraud.
  • Reduced safety incidents.
Some effective employee engagement strategies
  • Employees have a good understanding of the business’s values and mission, and clear expectations about their role in achieving these.
  • Employees have the necessary equipment, resources and authority to do their jobs well.
  • Regular employee performance and progress catch-ups with good quality, authentic and genuine feedback.
  • Good relationships with superiors who are truly concerned for employees’ wellbeing and willing to provide support.
  • Opportunities for employees to voice opinions and contribute ideas.
  • Genuine and meaningful recognition, given publicly and timeously in front of superiors and peers.
  • Peer-to-peer recognition has been found to have twice the impact of recognition from managers.
  • Flexible work schedules and remote working options that allow employees to meet family obligations.
  • Onsite employee programmes addressing, for example, health and wellness, or personal finances.
  • Onsite family day care facilities and/or onsite food services.
  • Having friends at work significantly improves employee commitment and satisfaction, by as much as 50% according to some studies.
  • Volunteering unites employees towards a common greater good.
Implementing employee engagement strategies on a budget

When looking at the employee engagement strategies listed above, it is encouraging that most don’t involve high costs. What is crucial is to ensure that any strategies implemented add real value to your employees and impact their work and personal lives in a meaningful way. The best way to do so would be to ask your employees directly, perhaps at a team meeting or via an anonymous online survey.

Perhaps an employee-of-the-month program with rewards such as breakfast with the Boss or gift cards could yield great results. It may be that a Friday afternoon off once a month or paid leave on an employee’s birthday are top choices. Celebrating national holidays or sporting events as a company, or providing paid time off for volunteering together, will create opportunities to build friendships and create a sense of belonging.

Especially in small businesses, such employee engagement strategies can create a happier, more productive and faster-growing company.

While most of the employee engagement strategies discussed are not part of formal compensation packages, employee relations are always subject to intricate labour and tax laws as well as a host of practical business considerations. Be sure to run any employee perks you are planning to offer by your accountant to check there are no unintended outcomes.

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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Setting Up Your Finances in a New Business

“A house built on granite and strong foundations, not even the onslaught of pouring rain, gushing torrents and strong winds will be able to pull down.” (Haile Selassie, Former Emperor of Ethiopia)

When starting a new business, few things are as important as establishing your finances and making sure they are right. Building the foundation for stable, accurate financial reports and tax filing will see you in good stead in the future and establish the practices that will lead your company to success. Here are the top seven tips.

1. Set up a deadline calendar

Whether you use a large whiteboard in your office, or a digital reminder service like Google Calendar, it is vital that you track which payments are due and when. Whether it’s your staff salaries, business loan payments or accounts payable, you need to know exactly when each amount is due in order to plan your cash flow accurately. Not having the cash on hand when a payment is due not only hurts your business credit rating but can also cost you more in fines or late-payment fees.

2. Monitor your accounts receivable

Just because you have invoiced a client doesn’t mean that money is immediately coming in. Check the terms of each client’s contract to understand exactly when they are likely to pay. If a client pays on a 60-day cycle it is unreasonable to expect the money will come in before that and you therefore need to plan other ways to have cash on hand to meet payments. For each invoice make a note on when it is likely to be paid.

3. Track your inventory

Inventory on hand is as much a part of your finances as the actual cash in your bank. Are you ordering too much and letting things rot on the shelves, or are you ordering too little and being forced to pay for rush deliveries to meet your orders? Tracking inventory will allow you to make better purchase decisions and streamline the operations of your business thereby reducing costs and stress.

4. Consider opening two business bank accounts

Account 1: It is vital that you be able to track all expenses you are incurring in order to make accurate business decisions and monitor your business spending. To do this you will need one bank account in the name of the business dedicated to the daily running and expenses of the business. This will allow you to accurately reconcile the account at the end of the month and see whether more money is coming in than going out. Don’t have more than one daily operations account, and don’t use your personal accounts to pay business expenses – if you do, monitoring your cash flow, income and expenses becomes that much harder.

Account 2: The second account you should think of opening is a savings account, into which you will deposit a percentage of each month’s income to cover the taxes at the end of the year. The last thing you want to do is arrive at year-end unable to afford what you owe to SARS. Ideally, you should pay more than you owe on taxes alone into this account to also build a cash reserve. This cash reserve will see you through difficult times or cover unexpected expenses.

5. Get a bookkeeper

Whether you get a bookkeeper or download bookkeeping software, it is vital that you keep track of all your incomings and outgoings. QuickBooks, Wave, Zoho BooksXero, and FreshBooks are a few examples of the best apps for small business owners. Apart from making the issuing and tracking of invoices easier, knowing exactly which jobs have been invoiced, which have been paid and which are still owing as well as to whom, and how much you owe, will help you to plot payments, make cash flow decisions and price your product more accurately. Moreover, come tax time, you will have all of the paperwork necessary to give to your accountant to ensure as favourable a tax season as possible.

6. Download a receipt scanning app

Now that your bookkeeper or bookkeeping software is tracking your invoices and accounts, you need to also track and accurately record your expenses that are made independent of your monthly suppliers. Fortunately, there are many receipt scanning apps that will help you to quickly and accurately record each business lunch receipt and stationary purchase, and then add them to an online database. Exactly which one you download will depend on your exact needs, but here are a few to get you started: Zoho ExpenseExpensifyWaveQuickBooks Online and Evernote Scannable.

7. Download an app to record business travel

While you can get digital logbooks that you plug into your computer, it is far easier these days to simply download an app that will record each of your journeys automatically in the background on your phone. MileIQ, for instance, is great, because with a simple swipe after each journey you can record whether it was for personal or business reasons, and at the end of the year can print out a full record of all your travels and the related expenses.

Setting up your business foundation is essential for the health of your business. Once you have done all of the above, and accurately tracked your expenses and income for the year your accountant will have an easy time saving you money, ensuring you only pay the taxes you owe and not a cent more.

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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Happy Tax Freedom Day!

“In 2022 South Africa had the 12th highest income tax burden, the 9th highest company income tax burden, and the 14th highest non-resource tax burden worldwide.” (Garth Zietsman, South Africa’s Tax Freedom Day statistician)

 Tax Freedom Day marks the day in the year when South Africans stop giving all their money to their government for the year and finally start working for themselves. In 2023, Free Market Foundation statistician Garth Zietsman has worked out that this day will be the 14th of May, two days later than in 2022, which in turn fell 10 days later than predicted in 2021.

In 2023, the average South African taxpayer has had to work for a predicted 133 days to pay their taxes. Back in 1994, South Africans took 101 days. The usefulness of the metric is now clear – South Africans are now spending a full month longer every single year working for their government.

According to Zietsman, the actual date may be far worse: “The prediction is based on the intended level of tax collection for central government mentioned in the Budget Speech. Typically, the actual figure, which is the general government revenue as a percentage of GDP from the Reserve Bank Quarterly, turns out to be 30% more than the intended figure for central government”.

The Freemarket Foundation is a Johannesburg based, classical liberal think tank, who have adapted the concept of Tax Freedom Day from Florida businessman Dallas Hostetler who developed and trademarked the idea in America in 1948.

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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Read more about the article Your Tax Deadlines for May 2023
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Your Tax Deadlines for May 2023

  • 5 May – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 30 May – Excise Duty payments
  • 31 May – 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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Read more about the article Why (and How) to Submit Skills Development Reports by 30 April
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Why (and How) to Submit Skills Development Reports by 30 April

“We need to give importance to skill development because this way we can end unemployment.” (Narendra Modi, Prime Minister, India)

Since 1999, the Skills Development Levy (SDL) has served to fund skills development in the country. It encourages a planned and structured approach to skills development so employers, employees and the economy can benefit from a better skilled and more productive workforce.

All South African companies with a payroll exceeding R500,000 per year (that’s just under R42,000 per month) – including salaries, wages, overtime payments, leave pay, bonuses, fees, commissions and lump sum payments, and with certain specific exclusions – are required to pay SDL of 1% of the total amount paid in salaries to employees each month. It is declared and paid by employers to SARS with the other monthly employee taxes (PAYE and UIF) via the Monthly Employer Declaration (EMP201) and is then paid over to the relevant SETA by SARS.

Employers can claim back more than half of the levies paid each year, but most miss the opportunity by not meeting the stipulated requirements. Depending on the size of a company’s payroll, this could be a substantial amount. There are also other benefits that can be unlocked by meeting the requirements for claiming back the levies paid.

We briefly summarise below the benefits of claiming back the SDL paid, as well as how to do it in the most efficient way.

Benefits of claiming back levies paid
  • Claiming ensures valuable revenue is not forfeited – up to 70% of SDL paid to SARS in the financial period can be claimed back through the mandatory grant and other avenues.
  • 20% of the levy paid can be claimed via the mandatory grant, paid by the Seta every quarter, which is accessed as follows:
    • Appointing and registering a skills development facilitator (SDF)
    • Timeously submitting an approved Workplace Skills Plan (WSP)
    • Timeously submitting an Annual Training Report (ATR) based on the WSP.
  • 50% of levies paid can be claimed in discretionary grants for learnerships, skills programmes, apprenticeships, workplace experience placements, internships and bursaries, and organisations can apply using the same requirements for claiming the mandatory grant.
  • By offering SETA-accredited training, for example, mandatory training and registered learnerships, further tax rebates can be accessed.
  • Successful submission of the required reports will earn your company points for the Skills Development priority element under the revised B-BBEE Codes.
  • The WSP and ATR reports contain similar labour demographics information as the Employment Equity reports, facilitating improved employment equity management in the workplace.
  • Skills development initiatives positively promote a better skilled and more productive workforce, as well as proper succession planning.
  • Submitting the reports provides important sector information to the SETAs (Sector Education and Training Authorities), which informs the development of the SETA’s sector skills plan (SSP) and ultimately the National Skills Development Plan.
How to claim back levies paid
  • Appoint a suitably qualified and registered SDF to facilitate the training needs within the organisation and liaise with the SETA.
  • Companies with 50 or more employees need to establish and consult with a Skills Development Committee before the submission of the skills report.
  • Submit the Workplace Skills Plan and Annual Training Report for the period 01 April to 31 March via a registered SDF to the SETA with which the business is registered.
    • Workplace skills plans detail a company’s skills needs and the skills development interventions to address these needs, providing access to mandatory grants.
    • Annual training reports reflect the actual training data of the previous year, showing how priority skills defined in the Workplace Skills Plan have been addressed.
  • Keep records of all training provided, including attendance registers, invoices and all certifications.

Ask your accountant for help if you are uncertain about anything.

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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5 Business Plan Mistakes to Avoid

“Proper business planning demands that you focus on the self-interest of the customer at all times.” – (Brian Tracy, Author and Speaker)

Writing a business plan can feel like a daunting process, and making mistakes is part of the package, even if you follow the online guides and templates.  To make this process simpler, we have made a short list of common errors that somehow keep creeping into these vital documents.

Making it too long

As Amazon founder Jeff Bezos once said, “You know the business plan won’t survive its first encounters with reality. It will always be different. The reality will never be the plan.” He did, however then go on to stress that writing a business plan is essential to understanding what will make your business tick. It’s important to realise that your business plan will never be able to cover every contingency and every possible incident that can occur and should rather be focused on revealing the core business. Once you understand your core business implicitly, you will be able to write it down in a much more succinct fashion. A long business plan is therefore only evidence that you don’t yet understand what’s going on.

Understand your target market

No product is for everyone. Understanding who you are selling to and what will motivate them to buy is the first thing any investor will look for, and the most fundamental thing you will need to understand to be successful. It will shape who you hire, what your marketing looks like, and even what your startup’s logo will be. Simply believing you will market to everyone is putting your business on the path to failure.

Ignoring competitors

It is extremely common for companies to exclude business competitors from their business plan. Many believe that their new product is so superior, cheap or well-supported that competitors won’t stand a chance once it is marketed correctly, or simply don’t have as much understanding of the market they are entering as they think they do.  Having a sound, realistic competitor analysis shows investors you understand the market and know where your unique differentiators lie.

Neglecting a financial forecast

Many business plans ignore financial forecasts as they either don’t have the experience necessary or don’t believe they are important – of what use is guessing things that don’t exist? The truth is that a good financial planner or accountant should be able to help with these forecasts which need to include profit and loss, but also, essentially, cash flow and balance sheet. This area of the business plan will reveal to potential investors whether your plan has been carefully thought out, and takes realistic rates of growth into account, or whether it’s simply pie in the sky. No investor is going to work with someone who believes they will sell a million items in the first three months.

Being too strict

The business plan should always be viewed as a guide and not as a set of hard and fast rules. Any business plan that locks a business into a specific course of action is a bad one. You should always have the ability to pivot and make changes as necessary based on the latest feedback. Your ability to research new information and change direction will make it much more likely that your business will meet its long-term goals and needs.

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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Read more about the article UDZ Tax Incentive Extended: Could Your Business Benefit?
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UDZ Tax Incentive Extended: Could Your Business Benefit?

“…governments internationally have increasingly used tax measures to support efforts aimed at regenerating urban areas.” (SARS Guide to the UDZ Allowance)

The urban development zone (UDZ) tax incentive, provided for in section 13quat of the Income Tax Act (the Act), was introduced 20 years ago in 2003, as an accelerated depreciation allowance for property investments in certain central business districts. It aims to promote investment by the private sector in the construction or improvement of commercial and residential buildings, including low-cost housing units, situated within demarcated UDZs.

In the most recent 2023 Budget, this incentive was extended for another two years, to allow for the completion of a review of the incentive, which has yielded some successes, by motivating investment in South Africa’s cities. We briefly overview below what the tax incentive entails and the criteria that must be met, where it applies and other issues to take note of when deciding if it could benefit your business before it expires at the end of March 2025.

What the UDZ tax incentive entails

Individuals and companies investing in residential or commercial property in South Africa’s urban zones from which to carry on a trade, should carefully consider the UDZ tax incentive before deciding where to buy.

This tax allowance, when deducted, can substantially reduce the taxable income of a taxpayer, and – because the allowance is not limited to the taxpayer’s taxable income – can create an assessed loss.

However, five specific criteria must all be met before the allowance is granted. In addition, only certain costs can be considered for the purposes of the allowance. These are listed below, along with the UDZs listed by SARS, and some further issues to take note of.

Five criteria to be met
  1. Building requirement – The building must meet certain requirements, and only the cost of the erection, extension, addition to or improvement of the building, covering either the entire building or a floor area of at least 1,000m2 qualifies. Land costs are excluded.
  2. Urban development zone requirement – The building must be located within a UDZ.
  3. Trade requirement – A taxpayer will qualify for the allowance only if the relevant commercial or residential building or part of the building is used by the taxpayer solely for the purposes of trade, and only once the building has been brought into this use.
  4. Owner requirement – The building or part of the building that was erected, extended, added to or improved must be owned by the taxpayer deducting the allowance. Where the building or part of a building was purchased directly from a developer within three years after completion, an allowance may be deducted, provided the developer did not deduct any allowance, among other criteria.
  5. Date requirements – There are specified dates to which the allowance applies, including a commencement date requirement and a trade date requirement.
Costs that may be considered – and those that are not
  • Construction work
  • Architect and approval fees
  • Sidewalks
  • Parking for the building
  • Landscaping as part of the development (including earthworks, greenery and irrigation)
  • Drainage
  • Security (fences, cameras and surveillance equipment)

Costs specifically excluded are the purchase price of the land, VAT and transfer duty, financing charges, agent’s commission and transfer and related legal costs.

Where does the UDZ tax incentive apply?
  • Buffalo City
  • City of Cape Town
  • Ekurhuleni
  • Emalahleni
  • Emfuleni
  • eThekwini
  • Johannesburg
  • Mangaung
  • Matjhabeng
  • Mbombela
  • Msunduzi
  • Nelson Mandela Bay
  • Polokwane
  • Sol Plaatje
  • Tshwane Metro

Source: SARS

Other issues to take note of
  • Depending on the type of development involved – new, improved or low-cost – the allowance is calculated at a different rate of depreciation, providing for 20 – 25% of the costs allowed to be deducted in the first year, and the remainder over one to ten years
  • When purchasing a building or part of a building from a developer, 55% of the purchase price of a new building, or 30% of the purchase price of a building improved will be allowed as costs for purposes of the UDZ incentive
  • The UDZ incentive is an accelerated depreciation allowance, and not an additional tax allowance. A taxpayer claiming a UDZ deduction may not claim any other deductions on that building or part of the building.
  • For each building or part of a building on which the allowance is being deducted, you will need the necessary UDZ forms (UDZ 1, 2, 3 and 4 forms), as well as a location certificate and, where applicable, a certificate of occupation.

Taking advantage of this tax incentive, if it applies to you, could mean a difference of millions of rands to your future tax bill. However, this is a very complex tax incentive and there are many issues to be considered.

It is highly recommended that business owners consult with their accounting and tax practitioners to find out if they would qualify for the maximum allowance when investing in a UDZ, and to do so while still ticking all the compliance boxes.

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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Tips for Generating Customer Trust as a Start Up

“Consumers don’t just buy products and services anymore; they buy experiences. This demands a new approach to marketing, sales, and services; one that hinges on winning customer trust.” (Ben Jackson, Author “The Future of Commerce)

With customer trust being the most important element in attracting sales, contracts and clients, gaining that trust is an important step for any new start up. How can you make sales if you have no way to prove you are good at making sales? These tips should help any start up build that all important trust and make their first sales.

Make top level products

It may seem obvious, but whether you are offering a service, or selling products online, the first, and most critical thing you can do to develop as a company is to make sure your product is as high-quality as possible. Products that are easy for a customer to use, and that fulfil the client’s needs will always win their loyalty.

Price your product accurately

Pricing a product isn’t as easy as adding profit to cost. You need to price your product in such a way that you are covering all costs, making a profit, and pricing yourself correctly within the market. Getting this right will be crucial to finding, developing and retaining customers. Your accountant can help ensure no one feels cheated while you are also operationally effective.

Provide top level service in every way

The first few weeks and months of operation are absolutely critical when it comes to customer service. It may feel like nothing is coming in, but the day you receive an email it would be extremely wise for you to answer as quickly as possible. Handling enquiries politely, quickly and thoroughly will translate in the customer’s mind to a business which is caring and paying attention.

Show them your humanity

The first inclination for any customer is to mistrust brands – they are money-making machines. We do, however, want to trust new people we meet. Because of this, it’s a great idea to reveal the human face of your business early. Use the About Us page to introduce yourself and the team right from the start. Let people know your story, and how you came to establish your company. This allows you to imbue your brand with the real-life values you believe in and so establish the human connection in a way that only small brands really can.

Offer a free sample

People view free things as being risk-free interactions, and so are generally likely to take you up on the offer. By trading free samples or an hour of your work at no cost, in exchange for nothing but an email address, you give clients the chance to try your product or service and potentially even leave a review. You also get their email address, which is a good way to communicate with them and establish a genuine relationship.

Use testimonials

Whenever anyone compliments your business, you should think about asking them for a testimonial. According to studies, people these days trust online reviews and testimonials almost as much as they trust recommendations from friends. So, every review could be the difference between success and failure. If possible, make these videos. Video is increasingly important online, and the humanity showcased by a video of someone is a very strong incentive.

Have an easy return policy

If there is one thing that will make a customer take a chance on an untested brand, it’s the knowledge that should something go wrong they can get their money back. A strong returns policy also sends a clear signal to potential customers that you believe in your product.   Your returns policy should be clearly defined and easy to find on all of your media channels.

Handle all your reviews

Your reviews will influence new buyers’ desire to interact with your company, so do not ignore them. Answer every one. It’s easy to thank people for leaving good reviews (and you should), but it’s how you handle the bad ones that will give people the most confidence. Apologise for problems openly and reveal what you will do to fix them. This gives new customers a clear indication that while problems do happen to everyone, you go out of your way to resolve them.

Offer a loyalty program

According to Annex Cloud, 65% of a company’s revenue comes from repeat business from existing clients.  Harvard Business Review says it can be up to 25 times more expensive to sell to a new client than a returning one. It’s therefore a great idea to do everything you can to retain good customers. A loyalty program is a proven way to reward these clients and also give them an incentive to stick around. The Yotpo study on brand loyalty 2022 revealed that 83% of global respondents said belonging to a loyalty program influences their decision to buy again. Starting a worthwhile loyalty program will therefore impact the future performance of your company.

Promise only what you can deliver

It may be tempting as a newcomer to do everything you can for your customers, even if it’s not part of your business or your core ideals. The worst thing you can do though is over promise and then not deliver. This can be the start of the business developing a bad reputation that it would be difficult to recover from.

Eradicate the trust eroders

Many small things can erode trust: a lack of social media, spelling mistakes on your website, a longer than necessary purchasing process, hidden costs, or a lack of information about the product. Ask friends to go through your website, buy a product, or call your service centre and mark down a list of snags, or things they are concerned about. Points that come up more than once must be attended to as a matter of 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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Your Tax Deadlines for April 2023

  • 1 April – Start of the 2022/23 Financial Year
  • 6 April – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 26 April – Excise Duty payments
  • 28 April – 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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Budget 2023: How It Affects You and Your Business

“This is not an austerity budget. It is a budget that makes tough trade-offs in the interests of the country’s short and long term prosperity.” (Finance Minister Enoch Godongwana – Budget 2023)

Finance Minister Enoch Godongwana’s second Budget contained no major tax proposals, thanks to an improvement in revenue from higher collection in corporate and personal income taxes, and in customs duties.

Instead, the focus of Budget 2023 was firmly on the current energy crisis, which has resulted in a State of Disaster being declared. It announced that government will take over R254 billion of Eskom’s debt over the next two years, subject to stringent conditions.

Of the tax relief amounting to R13 billion to be provided to taxpayers in 2023/24 announced in the Budget, R9 billion is earmarked to encourage households and businesses to invest in renewable energy. More specifically, R4 billion in relief is provided for households that install solar panels and R5 billion to companies through the expansion of the existing renewable energy incentive.

These incentives are briefly detailed below, along with some of the other announcements that will impact individuals and businesses.

Budget announcements that will impact you personally
  • A new tax incentive to install rooftop solar panels: For one year from 1 March 2023, individuals will be able to claim a rebate of 25% of the cost of installing rooftop solar panels, up to a maximum of R15,000, to reduce their tax liability in the 2023/24 tax year.
  • The personal income tax brackets will be fully adjusted for inflation, increasing the tax-free threshold from R91,250 to R95,750.
  • Medical tax credits per month will be increased by inflation to R364 for the first two members, and to R246 for additional members.
  • The retirement tax tables for lump sums withdrawn before retirement and at retirement, will be adjusted upwards by 10%, increasing the tax-free amount at retirement to R550,000.
  • Revised draft legislation on the ‘two-pot’ retirement system will be published, including the amount immediately available at implementation from 1 March 2024. Withdrawals from the accessible “savings pot” would be taxed as income in the year of withdrawal.
  • Social grants will increase in line with CPI inflation. The R350 grant will continue until 31 March 2024.
  • Increases in the excise duties on alcohol and tobacco of 4.9%, in line with expected inflation. This means that the duty on:
  • a 340ml can of beer increases by 10c,
  • a 750ml bottle of wine goes up by 18c,
  • a 750ml bottle of spirits will increase by R3.90,
  • a 23g cigar goes up by R5.47,
  • a pack of 20 cigarettes, rises by 98c.
Budget announcements that will impact your business
  • Expanding the existing section 12B tax allowance for renewable energy, businesses will now be allowed to reduce their taxable income by 125% of the cost of an investment in renewables for two years from 1 March 2023. There will be no thresholds on the size of the projects that qualify. According to National Treasury, where a renewable energy investment of R1 million is made by a business, that business will qualify for a deduction of R1,25 million, which could reduce the corporate income tax liability of a company by R337,500 in the first year of operation.
  • The existing Bounce Back Loan Guarantee Scheme will be updated to become the Energy Bounce Back Scheme, to be launched in April 2023. Government will guarantee solar-related loans for small and medium enterprises on a 20% first-loss basis.
  • The research and development tax incentive will be extended for 10 years and will be refined to make it simpler and more effective.
  • The urban development zone tax incentive will also be extended, by two years.
  • Manufacturers of foodstuffs will for two years (from 1 April 2023) also qualify for the refund on the Road Accident Fund levy for diesel used in the manufacturing process, such as for generators, to ease the impact of the electricity crisis on food prices.
Budget announcements that will impact all
  • Providing tax relief of R4 billion, the general fuel levy and the Road Accident Fund levy will not be increased this year. However, the carbon fuel levy will increase by 1c to 10c/l for petrol and 11c/l for diesel from 5 April 2023.
  • The health promotion (sugar) levy will remain unchanged for the following two fiscal years.
  • The brackets of the transfer duty table will also be increased by 10%, allowing properties below R1.1 million to avoid any transfer duty payments.
How best to manage these changes and their impact?

In addition to the announcements detailed above, there were other technical amendments proposed in the Budget review that will require professional advice.

As tax collection remains government’s main source of income, you and your business would do well to rely on the expertise and advice of tax professionals as you determine the impact of the Budget 2023 announcements on your tax affairs.

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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Budget 2023: Your Tax Tables and Tax Calculator

The big Budget Speech 2023 tax news was the introduction of tax incentives for investing in rooftop solar and renewable energy. The Budget also detailed tax relief in the form of adjusted tables for tax and rebates for individual taxpayers, adjusted tables for retirement tax and transfer duty, and the expected increases in ‘sin’ taxes. How will these changes affect you directly?

To better understand the impact of the Budget on you and your business, here is a selection of official SARS Tax Tables, then follow the link to Fin 24’s Budget Calculator to do your own calculation.

Businesses – corporate tax rates unchanged*

Source: SARS’ Budget Tax Guide 2023

Individual taxpayers – tax tables adjusted

Source: SARS

Source: SARS

Source: SARS

Transfer duty table – adjusted 

Source: Budget 2023 People’s Guide

Sin taxes raised

Source: Budget 2023 People’s Guide

How much will you be paying in income, petrol and sin taxes?

Use Fin 24’s four-step Budget Calculator here to find out the monthly and annual impact on your  income tax, as well as what you will pay in future in terms of fuel and sin taxes, bearing in mind that the best way to fully understand the impact of the announcements in Budget 2023 on your own and your business affairs is to reach out for professional advice from your accountant.

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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Read more about the article How To Prepare a Reliable Disaster Recovery Plan
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How To Prepare a Reliable Disaster Recovery Plan

“The time to prepare for disasters is before they happen” (Stephen Matheson, Vice President of Product at BridgeHead)

Given how reliant we all are on our IT infrastructure, it will come as no surprise to learn that one of the worst things that can happen to a business is for a failure to occur in that department. Whether it’s fire, floods, or hacking, being taken offline can spell a serious period of trouble for most organisations. In the time it takes to get back up and operational projects can be delayed, the quality of work can suffer, or worst of all, everything is put on hold for months while data is recreated. All of this can lead to strained relationships with both customers and suppliers and potentially the end of the business.

A Disaster Recovery Plan is the pre-planned process a company will turn to when disaster strikes to ensure that a short-term problem does not become a permanent one.

Here are five simple tips for what you need to consider when drawing one up.

  • Have a response checklist
    The response checklist is a detailed breakdown of which employees should be contacted and what they should do in the event of a disaster. These should cover everything from who phones your IT support company to who puts out the fire or organises the evacuation drill. Ideally, these responses should be practiced. It’s no good telling someone they have to turn off the building’s water in the event of a flood if they don’t know where to do that.
  • Have a data backup plan
    All company data needs to be backed up, as regularly as possible. How this is done will depend on how vital that data is to the operational capabilities of your business but should happen at least once a day. Look at your company carefully and decide which information is vital and which can safely be lost. You don’t need to back up all your client emails if you also keep other records of their projects for instance.Data is a business asset and has real value. The more important the data, the more strictly and safely that data needs to be backed up. Can you do it yourself on a hard disk that the secretary takes home, or do you need a full-scale external, cloud-based solution?
  • How are you going to tell your clients?
    While it’s usually a good idea to keep drama and difficulties far away from your clients, in this instance it may be important to tell them what is going on to explain any delays they may be about to experience and how you are planning to meet their orders.  In addition, provide them with any alternate contact details.Your plan should detail exactly how that is going to happen. Having pre setup and approved email addresses and telephone numbers organised will save a lot of time and frustration until your company is back on its feet.
  • Cost considerations
    Your plan should also take into account the cost considerations of setting things up anew. Will you need to buy new servers? Do you need to bring in IT experts to recover data? The money for this should be set aside and available as every day you delay your recovery is another step closer to bankruptcy.Speak with your accountant as to how you can finance this fund, or whether insurance options may be a financially viable option for your company.
  • Vital document and data storage

On top of all of this, your Disaster Recovery Plan should also detail where copies of all the most vital information will be stored and how they can be retrieved. This should be a safe and secure offsite location. Keys and access codes need to be kept in a third location as well.

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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Five Essential Bookkeeping Tips for Small Businesses

“Making good judgements when one has complete data, facts, and knowledge is not leadership – it’s bookkeeping” (Dee Hock, Founder and CEO of VISA)

When running a small business, it often feels like you are doing everything yourself, and some important tasks can slip under the radar. One aspect that should never be forgotten though is bookkeeping. While intimidating, keeping your finances in order need not be as hard as it sounds. Here are our tips for ensuring your accounts remain ordered and your peace of mind intact.

  1. Ask your accountant
    If you want to keep things as simple as possible and guarantee you never run foul of the law, getting your accountant in to do your bookkeeping is the safest and most efficient way to do your books. Apart from being able to manage your finances, an accountant would be able to help save on taxes and advise you on areas of the business that may be streamlined.
  2. Keep your personal and business accounts separate
    It may not seem like much, but mixing up which account pays for what can lead to hundreds of extra hours of work over the course of a year working out which deductions and expenses relate to your business. Rather keep personal and business accounts and banking separate.
  3. Set up reminders for important deadlines
    Using an online calendar, it’s now easy to set up reminders for all those important tax and other deadline dates so you know when things are becoming urgent.
  4. Keep receipts
    Be sure to keep all receipts to build a verifiable audit trail. Whenever you pay anything out to a supplier it’s important to get an invoice and file it away. Keep all your receipts for all business expenses and purchases. You never know when you may be hit with an audit and need to prove everything you have said.
  5. Keep reports
    Every month generate a one-page document detailing all your income and expenditure. Ask your accountant to set up a simple monthly one-page report that, in addition, compares actual income and expenses to your budget. It doesn’t have to be detailed but should give you an idea of just where the money is going and what is coming in. As well as making bookkeeping easier, it will also help you track the growth and health of your company.

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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Read more about the article Effective 1 March 2023: New Earnings Threshold and National Minimum Wage
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Effective 1 March 2023: New Earnings Threshold and National Minimum Wage

Employers and employees need to keep an eye on the annual increases in both the National Minimum Wage and the Earnings Threshold, summarised below for your convenience. Both are effective from 1 March 2023.

The National Minimum Wage increase

The National Minimum Wage (NMW) for each “ordinary hour worked” has been increased by 9.6% from R23-19 to R25-42. Workers who have concluded learnership agreements in terms of the Skills Development Act are entitled to a sliding scale of allowances.

Domestic workers

Domestic workers were brought into line with the NMW in 2022, and assuming a work month of 21 days x 8 hours per day, R25-42 per hour equates to R4,270-56 per month. The Living Wage calculator will help you check whether or not you are actually paying your domestic worker enough to cover a household’s “minimal need” (adjust the “Assumptions” in the calculator to ensure that the figures used are up to date).

The Earnings Threshold Increase

The annual earnings threshold above which employees lose some of the protections of the Basic Conditions of Employment Act has been increased by 7.6% from R224,080-48 p.a. (R18,673-87 p.m.) to R241,110-59 p.a. (R20,092-55 p.m.).

“Earnings” (for this purpose only) means “the regular annual remuneration before deductions, i.e. income tax, pension, medical and similar payments but excluding similar payments (contributions) made by the employer in respect of the employee: Provided that subsistence and transport allowances received, achievement awards and payments for overtime worked shall not be regarded as remuneration”.

Some employees enjoy only limited BCEA protection even if they earn below the threshold – notably any “senior managerial employee” (“an employee who has the authority to hire, discipline and dismiss employees and to represent the employer internally and externally”), any “sales staff who travel to the premises of customers and who regulate their own hours of work” and any “employees who work less than 24 hours a month for an employer”. Take specific advice for details.

The threshold also impacts on some of the protections provided in the Labour Relations Act –

  • Employees earning less than the threshold, if contracted to a client for more than three months through a temporary employment service (“labour broker”) are deemed to be employed by the client unless they are actually performing a temporary service.
  • Fixed-term employees earning below the threshold are deemed to be employed indefinitely after three months unless the employer has a justifiable reason for fixing the term of the contract.

Turning to the Employment Equity Act, employees earning over the threshold can only refer unfair discrimination disputes (other than disputes based on sexual harassment) to the Commission for Conciliation, Mediation and Arbitration (CCMA) with the consent of all parties. Otherwise, they must go to the Labour Court for arbitration.

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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Read more about the article Your Tax Deadlines for March 2023
time for taxes

Your Tax Deadlines for March 2023

  • 7 March – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  •  30 March – Excise Duty payments
  •  31 March – End of the 2022/23 Financial Year
  •  31 March – 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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Read more about the article Ignoring an Online Review Could be Catastrophic for Your Business!
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Ignoring an Online Review Could be Catastrophic for Your Business!

“Your most unhappy customers are your greatest source of learning” (Bill Gates)

If you have founded a business then there is little less certain than that at some point in the future, you will get a bad review. It’s simply impossible to please all of the people all of the time, which is why many business owners say they don’t worry too much about reviews and try to keep on doing their best. The sad part is, they really should be worrying about their reviews, both good and bad.

A series of recent reports suggest that there is little as damaging to a modern business as bad reviews that go unanswered. With 91% of all 18 to 34-year-olds saying they trust online reviews as much as recommendations from a friend and as many as 93% of all customers saying they check reviews before buying, the impact of a company’s online reviews is obvious. But there’s more – you should respond to all reviews, both good and bad. According to the BrightLocal Local Consumer Review Survey 2022, 57% of all consumers say they would be ‘not very’ or ‘not at all’ likely to use a business that doesn’t respond to reviews at all.

Under this climate it might seem that, while a good review could gather new customers, getting a bad review could be a death knell for your company. Fortunately, all kinds of reviews are good opportunities to show off your company, turn experiences around, and even gather customers. Assuming you do the right things. Here then is how you should be handling your online reviews.

Track your reviews

The first step is to make sure you know when and where a new review has been written about your company. How can you possibly respond to something you don’t know exists? Once you know a review is up, you need to react quickly. It’s no good responding years later.

Two different sites will help you to track and respond to reviews across the internet and may become valuable tools for managing your reviews as well.

First is Google my Business which not only allows you to manage and track your online reviews but can also help with sending information to clients and promoting your business. All it takes is a free account and you can help potential new customers find your business and ensure they get the information they need. Having positive Google Reviews can often be critical when it comes to customers making buying decisions.

In South Africa, Hello Peter has established itself as a core place to review companies and for companies to respond. While it can be more expensive to respond as a business, there are definite benefits and keeping tabs on your Hello Peter reviews will help you to know exactly where you stand.

Professional accounts on other sites like Trust Pilot or Media Tool Kit can also help you to track and interact with customer reviews. If you are a new company this may seem like an unnecessary or unwarranted expense, but as already seen, it can also be one of the most valuable tools you can use. If you are battling to find the space in your budget, it is highly recommended that you speak to your accountant about how to streamline and maximise your finances to ensure it can be afforded.

Respond to all reviews, good and bad

As already established, it’s absolutely vital that you respond to reviews, whether they are good or bad. According to the Local Consumer Review Survey 2022, 89% of consumers are ‘highly’ or ‘fairly’ likely to use a business that responds to all of its online reviews.

For a good review, you should of course thank the customer for their kind words (see some tips on how best to do that here), and you can also ask them if they would be open to you using what they said in future marketing. A bad review takes a little more finesse. While most sites give you the option to turn off reviews, avoid the temptation to do so. The worst thing you can do is censor your customers. According to Oberlo, 62% of customers say that they won’t buy from brands that censor reviews.

It’s not necessarily about what they said

For a bad review you may be tempted to reject what the reviewer is saying. Do not do this. The person reading your reviews is much more likely to side with the person leaving a review, even if they are being unfair or wrong. Instead, take this as an opportunity to show how good your customer service is. Those reading the review will understand that sometimes things go wrong and want to see how you react when they do, or how you react to unfair or mistaken criticism.

Customers who write reviews are desperate to be heard and understood. It is therefore vital that your response to a bad review does more than simply apologise. You need to show the customer that you are listening. This is done by looking into their particular experience, responding directly to that and clearly acknowledging how they are feeling. Ultimately, nothing is going to make this customer more upset than ignoring the way they feel or trying to invalidate their emotions.

Instead, take a minute to express their feelings are valid – “I am sorry for how you feel”, then back that up with what you are going to do to fix it. Describe the facts of their case, and show you know whom you are speaking to, then explain what will be done to correct their unhappiness. Conclude by asking if there is anything else you can do.

If it looks like the review process is going back and forth online, ask the customer for their contact details so you can respond personally. Never ask them to contact you. Asking them to contact you elsewhere suggests you are simply trying to hide your response while giving them the personal attention of a phone call makes them feel like they have been heard.

What to do with fake reviews

There is a third kind of review, one that can be even more damaging than a really bad review and those are reviews written by bots or fake accounts. Usually, these reviews are damaging simply because they tend to use much more emotive language. The reviews are never casually negative, but rather fumingly angry and as there will never be a response from the complainant, can make it look like you never resolved the problem.

Fake reviews are easy to spot. Usually, the reviewer will have no personal information, and their reviewing methods will be inconsistent. Additionally, their reviews are far more likely to link out to third-party products or websites. Often the review they left for you will be repeated on other sites and for other brands as well, so do a Google search to determine if this is the case.

Luckily handling them is simple, but it must be done. Simply find the administrator contacts for the review site and alert them to the fact that you have been fake reviewed with whatever evidence you have on hand. This should be enough to get those reviews taken down.

Ask for reviews

The final and best way to handle a bad star rating for your company is to ask happy clients to post positive reviews. If someone sends you an email or letter thanking you, why not pop them an email with a link asking them if they would consider leaving a formal review? WordStream has some more tips for you here. According to the Local Consumer Review only 3% of consumers will even consider using a company that has only 1 or 2 stars from reviews, down from 14% in 2020, so ensuring you keep that star rating up is going to be critical to your future success.

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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Read more about the article Maximise Your Business Travel Tax Deduction
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Maximise Your Business Travel Tax Deduction

“Without a logbook, you will not be able to claim a travel deduction.” (SARS Travel Logbook 2022/23)

Even while recovering from the economic impact of COVID and facing the challenges of power blackouts, businesses and their employees are also contending with the costs of travel that have reached historic highs. Thankfully, expenses related to business travel can be deducted from taxable income – reducing the tax liability for taxpayers, including businesses, employees, commission-earners and independent contractors. All these taxpayers should prioritise maximising the available tax deductions by ensuring they can claim for every actual business travel-related expense.

This is increasingly important given the rapidly rising costs of travel, fuel and vehicle ownership. Fuel prices have more than doubled over the last five years and continue to set new records. In addition, Wesbank recently reported that the monthly cost of vehicle ownership for an average entry-level vehicle is 33% higher than five years ago and has increased 32% between November 2021 and November 2022.

To claim any business travel expenses, it is compulsory to keep an accurate and up-to-date SARS-compliant logbook for each vehicle. In addition, there are other tax implications related to travel expenses, travel allowances and travel reimbursements, some of which are briefly highlighted below.

Claiming the business travel deduction – fast facts
  • Businesses can claim business travel expenses incurred in the production of income.
  • Employees who receive a travel allowance can claim a deduction for the use of their private vehicles for business purposes.
  • Employees may also be entitled to claim a reduction on the fringe benefit in respect of business kilometres travelled in a company car.
  • To claim any travel deduction, an accurate, up-to-date logbook detailing all business kilometres travelled is required. SARS accepts electronic logbooks.
  • There is no deduction allowed for private travel, which is any travel not for business purposes, such as travelling between home and work.
  • In addition to a logbook, taxpayers who want to claim actual travel expenses should keep accurate records and proof of all travel expenses, such as fuel and maintenance, incurred during the year.
  • A separate logbook and records must be kept for each vehicle used for business purposes.
  • SARS reserves the right to query and audit the content or information recorded in any logbook by the taxpayer.
  • Logbooks and other records must be kept for at least five years as taxpayers may be required to submit them to SARS for verification of travel claims.
How to claim a business travel tax deduction
  1. Record the vehicle’s odometer reading on the first day of a tax year (1 March for individuals and also for companies).
  2. Maintain the logbook all year – SARS requires the following minimum information for every single business trip: date of travel; kilometres travelled; and travel details including where the trip started, the destination and the reason for the trip. It is not necessary to record details of private travel.
  3. Keep records of all related travel expenses such as fuel, oil, repairs and maintenance, car licence, insurance, vehicle tracking costs, wear-and-tear, and finance charges or lease costs to claim the actual travel costs incurred.
  4. Record your motor vehicle’s closing odometer reading on the last day of the applicable tax year (end of February for individuals and also for many companies). The difference between the opening odometer reading and the closing odometer reading equals the total kilometres (business and private) travelled for the full year.
  5. Calculate the total business kilometres for the year using the detailed logbook.
  6. The travel deduction can then be calculated in one of two ways:
    • Use the cost scale table supplied and updated annually by SARS, if you have not kept an accurate record of all travel expenses – the table simply provides a rate per kilometre based on the value of the vehicle, or
    • Calculate the claim based on actual costs incurred, determined by the accurate records and proof of all business travel expenses during the year, in addition to the logbook.
Tax implications to beware of
  • If an employee receives a travel allowance as part of his/her remuneration, 80% of the travel allowance must be included when calculating PAYE. This percentage is reduced to 20%, where the employer is satisfied that at least 80% of the motor vehicle use during the tax year will be for business purposes.
  • However, if there is any underpayment of PAYE on the travel allowance due to incomplete or incorrect information, the employer is liable for any shortfall, so obtain professional advice before providing travel allowances and ensure employees with travel allowances keep detailed logbooks.
  • Fuel costs can only be claimed if the employee pays the full cost of fuel used in the vehicle, and similarly, maintenance costs can only be claimed if the employee carries the full cost of maintaining the vehicle, for example, if the vehicle is covered by a maintenance plan.
  • Where a travel allowance or advance is based on the actual distance travelled by the employee for business purposes (reimbursive travel allowance), it is non-taxable (i.e. no  employee’s tax must be deducted) provided that two criteria are met: the rate per kilometre is not higher than the rate published by SARS, and no other compensation in the form of an allowance or reimbursement (except parking or toll fees) is received in respect of the vehicle.
  • If the two criteria mentioned above are NOT met, the reimbursive travel allowance is taxable and employees’ tax must be deducted from any amount that exceeds the prescribed rate per kilometre.

To maximise the tax deductions related to business travel, make sure that an accurate and up-to-date SARS-compliant logbook is kept current for each vehicle and each employee with a travel allowance, and that you consult with your accountant to understand the many tax implications for all concerned before making decisions regarding business travel.

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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Read more about the article Loadshedding: Survival Tips for Small Businesses
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Loadshedding: Survival Tips for Small Businesses

“We want to assure business that by the time you get back to work in January, we will have a much more stable situation.” (Public Enterprises Minister, Pravin Gordhan, December 7, 2018)

With loadshedding now a constant reality in our lives and Eskom and the government offering no signs of any form of short-term recovery, small business owners are being forced to increasingly adapt in order to survive. Here are our top five tips that might help, beyond simply “buy a generator/inverter”.

Adopt work from home

Those who are single will have heard the advice to date someone on a different loadshedding schedule, and this tip can be liberally applied across a company. By allowing staff to work from home, most businesses can be reasonably assured of having someone online and capable of handling client calls and enquiries at any given time.

At the very least companies need to be looking at offering flexible work hours, so they don’t find employees sitting in the traffic caused by all the traffic lights being out, only to arrive at work to sit in the dark. Allowing staff to do the work when and where they want could do wonders for productivity. Perhaps you can even negotiate with a local coffee shop for discounts when your staff come to work there?

Move to cloud-based solutions

If you aren’t already using cloud-based solutions now is the time to adapt. Storing everything you do on the cloud with storage and backup solutions such as Dropbox or Microsoft’s OneDrive will mean your data can be accessed from anywhere and is much less likely to be lost should servers or computers become damaged by the power cuts. Set computers to do regular saves and backups so nothing gets lost.

Use mains-free tools

If your tools can come in a battery-operated version, then now is the time to start trading out of plug reliant technology. PCs should be traded in for laptops, electric cookers and fridges can be traded in for gas and everything from power tools to hairdryers have battery operated versions. Move your company’s main number to a cell phone or to a VoIP solution and make sure all key personnel cell phones are permanently charged.

Unplug equipment

The second the power goes down it’s time to unplug all the expensive equipment. Don’t take the risk of the surge destroying your vital machines, assembly lines and computers when the power comes back on. If you can, invest in insurance, but make 100% sure that it covers loadshedding damage, as some companies have removed that protection from their contracts.

Ensure that your, and your key employees’ Wi-Fi connections are attached to a UPS system.

Use more than one payment system

Using two or even three different network options will ensure you are always able to take payments whenever your equipment is charged, even if the power is off. Don’t lose a vital sale or shut up shop simply because you have a contract with one network service provider whose tower always goes down when the power is off.

And of course, get solar, install an inverter and/or buy a generator – there are tax incentives for some solutions that your accountant can help you with.

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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How the New Assessed Loss Tax Limitation Works

“People who complain about taxes can be divided into two classes: men and women.” (Unknown)

The assessed loss rules have always allowed companies to deduct from their taxable income each year any assessed losses from previous years. The remaining assessed loss balances could be carried forward indefinitely. This meant that a company would only pay income tax once it made a taxable profit and all previous assessed losses had been deducted from the taxable income.

These rules have changed and may affect your next income tax bill.

What’s new?

Under the new rules, assessed losses brought forward from a previous year of assessment can only be offset against a maximum of 80% of the current year’s taxable income or R1 million, whichever is higher.

This means that many companies will now pay income tax on up to 20% of the taxable income for the year if it exceeds R1 million, even if the assessed loss balance carried forward from previous years far exceeds the taxable income. Adjust your cash flow forecasts accordingly. 

What you should know
  • The new rules apply to any year of assessment that began on 1 April 2022 onwards and that ends on or after 31 March 2023.
  • The new limitation applies to a company’s assessed loss balance as at 1 April 2022, and not only to assessed losses accumulated after this date.
  • Companies do not lose the balance of an assessed loss that could not be utilised in one tax year, it is just carried forward to the next tax year.
  • If a company does not trade for a full year of assessment and no income is earned from such trade, the assessed loss balance will be lost.
  • Further complex rules may apply in certain circumstances, for example, the 3-out-of-5-years rule and the ring-fencing of losses if a business carries on one of the listed “suspect trades”, which means professional advice is essential when deducting an assessed loss against taxable income.
Will your tax bill be affected?

Some companies will not be affected immediately, for example:

  • Companies that made a loss during the year and therefore have no taxable income to reduce;
  • Companies that do not have an assessed loss balance brought forward; and
  • Smaller companies with a taxable income below R1 million are not affected by the new rules and can still deduct the full balance of an assessed loss against 100% of their taxable income. 

However, the changes will have tax cash flow implications for other companies. The examples below illustrate this.

Both the old and the new rules are complex. In addition, some of the wording in the legislation still needs to be clarified, so speak to your accountant about the impact the new rules will have on your next tax bill.

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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Budget 2023: The Minister of Finance Wants to Hear from You!

“Finally, we pay tribute to the millions of South Africans, whose resilience and courage during these times of pandemic and economic hardship, is an inspiration to all of us who have the privilege to serve in the public sector.” (From the 2022 Budget Speech)

Finance Minister Enoch Godongwana has invited the public to share suggestions on the 2023 Budget he is expected to deliver on Wednesday 22 February 2023.

Go to National Treasury’s “Budget Tips for the Minister of Finance” page and fill out the online form.

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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Read more about the article Your Tax Deadlines for February 2023
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Your Tax Deadlines for February 2023

  • 7 February – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 27 February – Excise Duty payments
  • 28 February – 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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Start 2023 Strong with the “Fresh Start Effect”

“We change our tools and then our tools change us.” (Jeff Bezos)

Every January, individuals and businesses have an opportunity to take advantage of what is called the “Fresh Start Effect” – referring to research evidence that shows people are more likely to make positive changes at times that mark the start of a new time period and represent a new beginning, most notably the start of a new year. 

With the right tools, businesses can maximise this Fresh Start Effect to begin the new year on a strong footing. Three business tools, in particular, are indispensable to achieve this: a business review; goals and a plan for the year – including a budget; and ways to measure progress in achieving goals and executing the plan in the months ahead. Fortunately, these tools are not expensive or difficult to use, and your accountant will be able to assist you to set your business up for great results in 2023.

  1. A business review 
    A comprehensive review of business operations is a simple but powerful business tool.It enables business owners and managers to analyse performance in achieving goals and meeting key performance indicators (KPIs), and to identify problems and spot trends timeously. Most importantly, an effective review will reveal what is working and what is not, so the team can celebrate successes and build on what is working, and also change what is not working to get better results.Some of the business areas that need to be reviewed may include:
    • Business plan, sales, marketing and branding strategies.Total income to total expenses, cash flow statement and debtors’ reports, actual vs budget spend, and the balance sheet.Internal resources including the company’s people and processes.Client base, client processes and customer satisfaction.Statutory and regulatory compliance.Fees, contracts and costs.
    The best way to do a business review is to involve your entire team and to call in professional assistance for a clearer understanding, particularly of the financial aspects of the review.
  2. Goals and a plan for 2023, including a budget 
    The business review will provide invaluable information and insights, creating a baseline from which goals can be set for the next 12 months. This enables planning for the year ahead, incorporating the necessary changes to get better results, as well as enhancing or duplicating the processes already generating good results.Goalsetting, as well as planning and budgeting to achieve these goals, are great tools for establishing the direction of the business for the next year, focussing the team’s attention and efforts, and improving the chances of success.SMART goals are always the most effective – these are goals that are Specific, Measurable, Achievable, Relevant, and Time-Bound. That is because SMART goals are clear and quantifiable and can be broken down into a plan that details the specific steps or milestones to be completed – and the budgets within which to do so.
  3. Measuring progress during the year ahead
    Measuring progress ensures both better management and greater motivation. What is measured can be managed, and progress on all business goals can be measured through, among others, regular and up-to-date financial reports, (KPIs) and project management tools.

    KPIs, for example, are like scorecards that track performance against business goals and can be an effective tool for keeping team members motivated during the year. Experts suggest that smaller businesses should start by measuring only a few KPIs in the crucial business areas of income; customers; employees; and processes; but your accountant will be able to provide invaluable advice for your specific business.  

Similarly, there are different project management tools for various types of projects or management approaches. Benjamin Franklin’s advice may be helpful here: “The best investment is in the tools of one’s own trade.”

This January, take advantage of the “Fresh Start Effect,” by reaching out to your accountant for advice and assistance in using each of these business tools to set your business up for a great 2023.

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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The Financial Steps You Need to Take Before You Open Your New Business

“Good fortune is what happens when opportunity meets planning,” – Thomas Edison

You have your idea, you have your mission statement and perhaps you even have an idea of who your first customers will be, but there are still a few things you should consider doing before you launch your company. When it comes to your finances doing these five things in advance will ready you and your business for success and allow you to focus more on the company and less on the necessary financial administration.

Deal with your personal finances

For some entrepreneurs starting a company is seen as a way to get themselves out of financial trouble. Unfortunately, if this is the case, the company will be starting off on the back foot. If your motivation for starting a business is as a way to repay your own loans or debts, then you won’t be making the best decisions for the company. Ideally, your finances should be clean with debts paid off and taxes up to date. This will allow you to focus on the company for what it is, rather than on what you need.

Ideally, you will be starting your company with your own personal finances sorted for the first six months at least, and with no debt.  If you are in trouble, or don’t have any savings, then it is important that you get any loans and debts under control and reshape your personal expenses in line with leaner times before you take your first new business step.

Consolidate any debts you may have and arrange for lower monthly payments. Cancel any unnecessary services and costs and try to get your monthly outgoings as low as you can before you quit your job or start your company. You are going to have tough months and it’s important that you are ready to weather them if you hope to succeed.

Open a business account

Many new businesses begin as extensions of the owner. Sometimes the owner’s finances are used to pay for business expenses and these costs get lost along the way in the search for success. It is therefore important to decide on a vehicle for your business (ask your accountant to advise you on whether you will be best off with a company, trading trust, or sole tradership) then open a business banking account to more accurately keep track of exactly what is owed by your business to you, or you to your business. All relevant business expenses are tax deductible, but this can’t happen if they aren’t accurately tracked and accounted for in the business. Opening an account will help you not only look more professional but also track your income and outgoings more effectively.

Get your taxes up to date

Your personal taxes are an important aspect of business leadership. If your taxes are not properly filed and up to date when you have a job, the chances are they are only going to get worse. Ask your accountant to look at your personal situation and ensure everything that is owed is paid and signed off.

The good news is that at the same time you can also ask your accountant to look at your business and advise you on how best to structure things to get the most from the money you are earning. In the early days, every cent is going to count, and you will want to wring every benefit possible out of the company to get it launched. You don’t want to be paying more tax than you are required to.

Take a basic finance course

Everything these days can be learnt online. Whether you take a formal course or watch a series of YouTube videos, it is highly advised that you learn the basics of finance, especially if you have never worked in that department before. While working with your accountant is an important step when starting any new endeavour, it is also important that you understand the basics of what is going on day-to-day when it comes to pricing, sales, expenditure, profit and loss. Without this knowledge you won’t be able to make the important decisions that can make or break a company.

Set up automatic invoicing

Many small business owners opt to use Word and Excel invoice templates when starting out, but these require manual entries, can be time consuming and are difficult to track. A recent study also revealed that 39% of invoices are paid late and 61% of late payments are as a direct result of invoicing errors.

Do you know which invoices have been sent out, which have been paid and which are outstanding? There are many automated invoicing systems, which will take the worries out of invoicing and allow you to track payments and due dates. This in turn helps you to keep track of cash flow and ensure that you always have the money necessary to pay your expenses.

Invoice automation systems can also offer automatic reconciliation, generate recurring invoices and even capture data on expenses from photographs of receipts. Importantly you can also generate automatic reminder emails to chase up payments and make your monthly payments automatically, too. The time and stress savings are enormous and at the end of the day you will be able to hand over organised and presentable books to your accountant, enabling them to file taxes and notice potential areas for savings more easily.

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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The Importance of Maintaining Your Tax Compliance Status in 2023

“Being tax compliant… is not just good for you, but also contributes to the positive growth of our country’s economy which in turn benefits all South Africans.” (SARS)

Businesses are often required to provide, confirm or share tax clearance information to another entity. This is because proof of tax compliance is an indicator of a company’s good standing in terms of its legal obligations and how well it is managed. There may be instances when an individual, another company, or a government entity needs to verify your tax compliance status, for example, during a prequalification as a supplier; for a tender application or bidding process; to confirm good standing and that your tax matters are in order with SARS; or for foreign investment allowances.  

Tax clearance information is no longer confirmed via Tax Clearance Certificates – these have been replaced by SARS’ Tax Compliance Status (TCS) system, which verifies your tax status online and in real-time, and makes it very important to ensure you and your company are always compliant.

How it works now

Instead of a manual tax certificate being issued as in the past, SARS’ new system allows individuals and businesses to obtain a TCS PIN (personal identification number).

Your accountant will be able to assist with the process of applying to SARS to obtain this PIN through eFiling which requires, for example, activating the TCS for the business or individual, merging all the tax types into one registered profile, completing the Tax Compliance Status Request and selecting the correct type of TCS: good standing, tender, or – for individuals only – emigration and foreign investment allowance. 

If all your tax affairs are in order, your PIN should be issued immediately via SMS or email. A unique PIN is issued for each TCS request submitted to SARS.

This PIN, along with your tax reference number is then sent to the third-party that requires confirmation of your or the company’s tax compliance status. To verify tax compliance status, the third-party will go to eFiling and submit your tax reference number and PIN under “New Verification Request.”

Your current tax compliance status will appear and will be colour-coded, indicating if your tax affairs are currently in order or not:

 – green indicates that all tax affairs are in order and the taxpayer is tax compliant;

 – red means the taxpayer is not tax compliant.

Click here to see full size screenshot

Source: 
SARS

It is important to note that the PIN is valid for a year and will reflect the current tax status at the date and time the PIN is entered into the TCS system (not the compliance status at the time the PIN was issued).

This means your tax compliance status on the system can change during the year in line with your tax behaviour, which might include, for example, an inadvertent late submission or missed payment. For this reason, it is crucial to continuously monitor your tax compliance status to ensure a non-compliant tax status does not impact business and other opportunities.

What is required to be tax compliant?

SARS says that the compliance status displayed reflects the following compliance requirements:

  • Registration for all required tax types
  • Submission of all required tax returns on time
  • All tax debt settled on time
  • Relevant supporting documents submitted.

To meet these requirements consistently across all the relevant tax types over the tax year, taxpayers should consider professional assistance.

Why it is so important to maintain compliance all year round?
  • Remember that a TCS PIN is valid for a year and third parties with whom you share the PIN will always see your current tax compliance status, so it is crucial to ensure that status is continuously monitored and is compliant at all times during the year, to avoid a negative impact on reputation and opportunities.
  • A non-compliant status can affect the confidence of potential clients, stakeholders and investors, as well as competitiveness in the market.
  • Continuous compliance does involve costs or resources but will never be as expensive as the costs associated with non-compliance, which generally involve both penalties and additional fees to rectify.
  • Non-compliance exposes taxpayers to wide and harsh collection or enforcement measures such as the confiscation of property, business closure, garnishee orders and agency notices. Some tax offences are also subject to custodial sentences.
  • Ongoing and consistent compliance all year means that when there is an instance of non-compliance, SARS will likely be more accommodating, because a taxpayer’s track record is one of the factors SARS considers when making determinations.
  • Maintaining a compliant tax status prevents tax surprises and enables lawful tax planning as well as the ability to take advantage of relevant rebates and incentives.

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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How to Know if You Need an Office for Your Business (and How to Make the Most of a Lease if You Do)

“In business, you don’t get what you deserve, you get what you negotiate,” Chester Karrass, Founder of Seminar group Karrass.

At some point, around halfway through the pandemic, experts began to whisper that office space was dead. “No one will be using an office by 2023,” they said. And yet, while it’s true that office space use has declined steeply in some parts of the country, many companies are still finding a use for a dedicated environment in which to conduct business.

Do you need an office for your business?

Remote work has proven that the humble office we remember is not essential, but there are still several functions an office can serve. For many employees, an office can serve simply as a distraction-free environment in which to work, while for others it may cement team relationships. For others, it can be a way to separate work and home lives. Employees also often need physical meeting spaces, a place to pore over designs and showcase physical models. Moreover, introducing new employees is easier in a formal physical office space, as is hosting company celebrations.

Despite this, remote work has seen a decrease in demand in many parts of South Africa and given this there has never been a better time than now to negotiate for that dedicated office space if you find that your company needs it.

These tips will help you get what you need.

Get the right amount of space

Here’s a quick guide to getting the space you need and no more:

  • Conference room (15 to 30 people): 75 to 90 square metres
  • Small meeting room (2 to 4 people): 30 square metres
  • Large meeting room (4 to 8 people): 45 square metres
  • Manager’s office: 25 square metres
  • Senior Manager’s office including private meeting table: 50 square metres
  • Server room (1 to 4 racks): 12 to 40 square metres.

In addition, you will need roughly 30 square metres of space per employee. This may adjust upward dependent on the kind of work you do (do your employees need to spread plans out on their desks for instance?) or downward if employees are hot-desking and not expected to be in the office each day. Finally, remember your future expectations. If the plan is to hire more people shortly, then they should be catered for as well. No use incurring the cost of moving in a few years if you can avoid it. For a more accurate picture that includes what you need, try this office space calculator.

Consider also the “hive” or “shared office space” alternatives on offer in some cities.

Other facilities

When renting an office, you may want to consider a variety of factors that don’t include size. How easy is the office to travel to? Is there traffic and easy access to public transport? Does the block have a generator or solar for loadshedding? Do you need access to printing shops or mailing? What sort of hours will you be open, and will employees need night security and parking? Will your employees need food stores nearby, or are you catering for them?

The rent is only a part of the cost

Most people will want to exclusively look at the price per metre in rent, but remember, while important the monthly rental is only part of the cost. What will you pay for water, lights, security and internet? Can you afford the phone charges? What is included in the rental? Are you responsible for building maintenance or renovation? Is there an allowance for any renovation that might be needed before you take occupation?  Refuse removal costs? What about the cost of furnishing a new building? Will you need to change the carpets or put-up signage on the building? Now is the time to bring in an accountant to help you work out the true cost of your office.

Negotiate

Do not assume that the rent or the terms of the rental agreement are set in stone. These days there is a lot more supply than demand so those who are leasing have the option to ask for rent decreases and favourable terms and conditions.

At this stage, it may be wise to bring in a professional to look at the terms of the contract and negotiate for you. Remember, the party that wins in these situations is always the one who is prepared to walk away.

The ongoing level of rental (and agreed rates of escalation) are likely to be your focus when negotiating the best deal but other negotiation points could include:

  • Maintenance of the building – who is responsible for what?
  • Length of the term – if you plan a long-term rental, many landlords could be open to lowering the initial rental, perhaps even granting an initial rental holiday, and/or to carry some of your other costs beyond rental.
  • Amenities (such as internet, water or electricity) might be included in the bill.

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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Read more about the article Your Tax Deadlines for January 2023
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Your Tax Deadlines for January 2023

  • 6 January – Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 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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Read more about the article The Why and the How of Annual Price Increases
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The Why and the How of Annual Price Increases

“Pricing power is important in business. You want your business to have the ability to raise prices as needed, especially with regard to inflation.” (Hendrith Vanlon Smith Jr)

It is imperative that businesses increase their fees, rates or product prices annually by at least the rate of inflation, just to keep pace with the ongoing increases in the cost of materials and production.

Inflation is the increase in the cost of goods and services in an economy. It ensures that, year after year, a business pays more and more for the same goods or services it uses in the production of its income. The higher the inflation rate, the higher the increase in your costs each year.

Without related annual price increases on goods or services provided by your business, the inflationary increases in the costs of production will result in lower profits, reduced product or service quality, or even market perceptions that your goods or services are cheap. In addition, the compounding impact of not increasing prices means your business falls progressively further behind in its ability to generate the appropriate and needed levels of profits.

Why do businesses neglect price increases?

There are many reasons why businesses do not increase their rates annually. Some may simply not have the business skills to set or maintain correct pricing. Many business owners are concerned that in a highly competitive market, a price increase will result in lost customers – a fear that was particularly heightened during the COVID years. Most businesses may simply not know how to increase their prices, especially if they have not done so for a few years, and then a substantial increase is required just to return to previous levels of profitability.

Why increases are crucial

In South Africa, the inflation rate is currently at a 13-year high of 7.5% – almost double the average inflation rate of 4.5% in 2021. This means that the cost of producing goods and services has increased by 12% over just two years, and without a related increase in sales prices, your business profits are being eroded at an alarming rate and with every sale.        

Conversely, increasing prices correctly can have a substantial impact on a company’s profitability. Studies quoted in The Harvard Business Review found that improvements in price typically have three to four times the effect on profitability as proportionate increases in volume. In fact, it was noted that a 1% improvement in price, assuming no loss of volume, increases operating profit by 11.1%.

Top tips for implementing price increases
  • Speak to your accountant about the impact of various price increases on your company’s income, profitability and tax liabilities.
  • Remember to discuss the potential impact of price increases with all staff, from the production team to marketing, sales and the accounts teams.
  • An easy place to start raising prices is to issue quotes for new business at the higher prices.
  • Include an annual price increase clause in all new client contracts and in contracts that are being renewed.
  • For existing clients, ensure that any price increase is communicated clearly, accurately and well in advance.
  • Link the price increase to improving or at least maintaining the value your clients perceive, for example, the use of co-friendly materials, unique expertise in an industry or high-quality products.
  • When implementing a price increase, consider adding extra value to a client, such as a free consultation, free deliveries or improved packaging or wrapping.Once a price increase has been finalised, update all relevant sales documents, website pages, POS systems and the like.

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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Read more about the article Simple Communication Tips to Boost Your Profitability
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Simple Communication Tips to Boost Your Profitability

“Communication is a skill that you can learn. It’s like riding a bicycle or typing. If you’re willing to work at it, you can rapidly improve the quality of every part of your life.” (American business speaker Brian Tracy)

Successful communication can be the difference between a profitable business and a failing one. Leaders who are unable to get across the needs of the company to their employees will very quickly close its doors. Likewise, people who are effectively able to communicate the things they need to be done will find their reward in a harmonious team and profitable enterprise.

This article is for those people who believe themselves to be among the latter. Those who have managed to traverse the minefield of communication and who find themselves surrounded by a largely effective team. In this position, it is possible you may still be making communication errors that are chipping away at your profitability and leading to a team that isn’t as effective as it possibly could be. They are common errors that anyone could make and everyone has seen at some point, but they definitely impact the bottom line. Here is how to cut them out and take your company to a brand-new level.

Avoid these communication errors
  1. Not answering the question

    No matter how well you explain things, being a leader sometimes requires you to answer follow-up questions from your team. While most of the time these questions are simple enough to answer, there may be occasions in which a manager may not be able to answer the question. Perhaps they don’t know the answer or simply didn’t take time to understand the question or misunderstood the question.

    When it comes to the effectiveness of your employee who is asking the question though, purposefully avoiding a response is as bad as mistakenly answering it incorrectly or ambiguously.

    For example, imagine your employee has sent you an email asking, “Did you say you wanted that report today, or next week?”

    A distracted communicator may see the first half of the message and rush to reply “Absolutely” or “Yes.” This ambiguous reply now wastes time and further confuses the employee. Does this mean the deadline has been pushed out or that it’s still due today? The employee may then be forced to follow up, or worse, assume an extension has been granted when it has not. Either situation wastes that employee’s time and can even lose a client.

    Avoid this simple error by ensuring you automatically read the full email and understand it before responding. Then make sure you make it clear which answer is to which question. Don’t assume the employee will be able to infer what is meant each step of the way.
  2. Too much information

    There is a very clear difference between providing your employee with the context and information they need to do their jobs and live up to expectations and giving them too much information. Giving an order with the right amount of information and the proper context will save time and make that employee better at their job.

    This error creeps in due to the manager’s assumption either that the employee needs more information than they do, or that extra information will help them to contextualize and make their own decisions. In the worst-case scenarios, it comes from the manager themselves not being sure what information the employee needs and simply giving them everything in the hope that this may cover it.

    The problem here is that having too much information can lead to time-wasting and analysis paralysis.

    For example, why share all the product information with your sales rep, when at the end of the day there are only three key points that separate your product from the competition and help to make the sale? Sending your sales reps a manual and expecting them to work out for themselves what aspects of your product will help them sell it to clients is as unhelpful as giving them no information at all. The time they waste reading the manual could rather be spent perfecting their sales techniques or working on their pitch documents.

    This also extends to bombarding your employees with opinions or reasoning that they may not need. Sometimes, in order to err on the side of caution, or to seem smarter than they need to be, managers can lean towards being verbose. As a manager you should avoid sending long paragraphs or speeches packed with thoughts, reasoning and explanations when a simple email explaining what needs to be done will remove wasted time and confusion.

    At the end of the day, conciseness is the key to good communication. Managers who impart all the necessary information and no more will find their teams perform more effectively and more profitably.
  3. Too little context

    Just as bad as too much information is when managers share information assuming the context is known by everyone in the organisation. Context gives meaning to orders and conversation in general, and not including it puts the person at the receiving end of the communication at a disadvantage. Without the proper context, they may think they have been left out of the loop or have forgotten something important and may never bring it up, instead choosing to muddle through and therefore doing a worse job.

    To avoid all this, communication should give a quick background to the new information, a short description of the client and what they like and how they like it to be done and an explanation for why any deadlines have been set. Once people understand why they are doing something and how it should be done and by when, they are much more likely to deliver on the task itself in the way you want it to be done.
  4. Emotional communications

    There are few places where emotional emails or other communications (WhatsApp or Teams messages and the like) are wanted, and the workplace is not one. Corporate culture places a lot of constraints on human behaviour and as such an emotional communication is definitely going to be not only career limiting, but also cause a lot of discomfort to all who are unlucky enough to be tagged in.

    The problem with emotional communications is that they cause so much discomfort that the issues they are discussing can often become more difficult to deal with. The delays in resolving these issues will lead to poor performance and an uncomfortable work environment.

    These kinds of constraints can also lead to the other kind of bad communication – passive-aggressive emails and communiques. In many cases these cause hurt feelings and divide teams without resolving issues because they claim not to be calling attention to any issue to begin with.

    This issue is fixed by encouraging an open and honest communication policy in your business. Allowing people to speak their minds respectfully and then genuinely listening allows people who have noticed problems to bring them to your attention and for those problems to be resolved. Do not let them linger in the shadow of hurt feelings.

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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Read more about the article What is the Metaverse and How Will It Impact Your Business?
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What is the Metaverse and How Will It Impact Your Business?

“Metaverse isn’t a thing a company builds. It’s the next chapter of the internet overall” (Mark Zuckerberg, Meta)

Among businesses, one of the most misunderstood aspects at the moment is ‘The Metaverse’. Businesses that do understand this new phase of the internet are currently seizing opportunities that their competition doesn’t even know exist. This is beginning to change the face of business and social interaction around the world. But what is the Metaverse and why should you be paying attention?

What is the Metaverse?

Quite simply, the metaverse is an extension of the current internet. It is a virtual three-dimensional space where people can interact with one another by developing 3D avatars. This space can take on the appearance of numerous real-world places, such as meeting rooms or concerts, or even more fantastical spaces. It is a fully immersive space on the internet

A blend of virtual reality, second lifestyle online worlds and augmented reality, the Metaverse can be accessed using a simple smartphone or laptop. This makes it extremely accessible for everyone.

What will it be used for?

No one knows for sure just how wide the eventual use case will be, but it will no doubt be huge. Some diverse examples will help illustrate just how fundamentally this might affect our lives and businesses:

  • Advertising and marketing – finding new customers and communicating with them;
  • The average person in the street – who may use it as a virtual reality gaming platform, or a place to attend a concert by an artist they would otherwise never get to see;
  • Businesses tapping into machine learning and AI to incorporate multiple, diverse data sets into a virtual space to improve presentations and decision making;
  • Surgeons from around the world all interacting over a patient’s scans;
  • Classrooms exploring the James Webb telescope images in 3D projections they can fly through;
  • Immersive in-depth product demonstrations;
  • Interactive TV shows;
  • Remote maintenance assistance to areas where technicians are usually unavailable; or
  • News production that puts viewers seemingly on the spot.

At the moment, the opportunities seem unlimited.

How will this affect your business?

At the moment only a small percentage of businesses are using, or even aware of the Metaverse, but this is set to change.  A recent Gartner Marketing Survey found that 35% of consumers have never heard of the Metaverse but as per projections, Gartner expects that by 2026, 25% of people will spend at least one hour a day in the Metaverse for work, shopping, education, social media, and entertainment etc. Be ready to adapt!

Here are just a few areas the rapidly developing Metaverse may impact your industry:

Remote work

Using the Metaverse for remote work will involve more than simply creating a virtual office to connect teams that may be working from home. Short, interactive virtual reality meet-ups could allow chats between colleagues and facilitate gatherings with, for example, a comedian or musician for entertainment.

Three-dimensional online shopping

Online shopping has the distinct downside of not allowing customers to interact with what they are buying. They are unable to visualise the object or get a sense of just what it may look like in their homes. Interactive 3D shopping will start narrowing this gap.

Manufacturing

Prototyping and product testing can be accelerated online. Factory layouts and warehousing can be tested for efficiency and raw materials can be sourced and shipped more easily and with fewer delays.

Streamlined workflows and cost optimisation

In a virtual world of in-depth, real and accurate simulators, employee training, onboarding and orientation need no longer take as much time as they once did. Everything from how to work your unique machinery to pitching the product to clients can be done in quantifiable virtual simulations.

Better sales

Advertising at the moment is all about connecting emotionally and drawing the consumer into the world of the brand. Imagine how much easier this will be when you can invite the customer into a virtual world to experience a tailor-made experience?

Global market for talent

Companies that operate out of countries with weaker currencies are going to find it increasingly difficult to source the staff they need. As the Metaverse draws the world together, those with talent and skills are going to be able to work remotely wherever they like and that will generally be in the places that pay them better. Everything from HR policies to salaries and benefits will need to change.

What is abundantly clear is that businesses that fail to adapt to the sea-change coming with the Metaverse will find themselves facing precarious times, as did those who failed to adapt to the internet.

The Metaverse is coming. Will you be ready?

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.

© CA(SA)DotNews

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Your Tax Deadlines for December 2022

  • 7 December Monthly Pay-As-You-Earn (PAYE) submissions and payments
  • 23 December Value-Added Tax (VAT) manual submissions and payments
  • 29 December Excise Duty payments
  • 30 December End of the 3rd Financial Quarter
  • 30 December 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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Read more about the article Selling Your Business – Plan Well, with a Tax Benefit When You Retire
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Selling Your Business – Plan Well, with a Tax Benefit When You Retire

“A diligent buyer will want up to five years’ worth of profit and loss statements, bank statements, tax returns, leases, supplier and vendor contracts, and customer data.” (Barbara Findlay Schenck – Author “Selling Your Business for Dummies”) 

The reasons why a business owner might decide to sell their business are many – perhaps to pursue a new or more exciting business opportunity, relocation, health reasons or retirement. Selling a business to family, to the other partners, to a loyal employee or a group of employees could also be part of a succession plan; or the business owner’s exit strategy may involve selling to an outside buyer, perhaps a competitor, a supplier, or a customer, or even an investor. 

Whatever the reason for selling, a smooth transition requires:

  • Planning well and in advance,
  • Determining a fair value for the business,
  • Getting books, accounting records and financial reports in order,
  • Collating the required paperwork, 
  • Managing stakeholder relations, and
  • Exercising a legal duty of care. 

The outcome of this approach is a business sale to the right buyer at the right price, with little to no disruption to business operations and no negative impact on staff morale or other stakeholder relationships. 

Plan well and far ahead, and beware the tax implications 

Planning well and ahead provides more control over the process, as well as time and opportunity to strategically enhance the business to ensure its full value is realised when you sell, and also ensures financial and tax implications are well understood. 

As just one example, the disposal or deemed disposal of assets, including the sale of a business, will attract capital gains tax (CGT), levied at a stiff 18% for individuals. 

Planning to Retire? Do you know about this CGT relief?

There is fortunately some CGT relief – little-known but very advantageous – if you are older than 55 (or in situations where the disposal is “in consequence of ill-health, other infirmity, superannuation or death”) of up to R1.8 million on the disposal of an interest in a small business; or of active business assets of a small business; or the sale of a small business. Of course, many conditions apply, including that the total active business assets of the taxpayer do not exceed R10 million and that the R1.8 million exclusion is cumulative over the taxpayer’s lifetime. 

Such a single tax implication can make all the difference between a profitable sale and one that is not. For example, let’s say you bought shares in a company 7 years ago for R2 million, and have since been actively involved in running the business. You decide to sell your share for R4 million, triggering a capital gain of R2 million. At 18%, the CGT liability would be R360,000. If you are over 55 years of age and meet all the other conditions, applying the R1.8-million exclusion would mean only the remaining R200,000 is taxed at 18%, reducing the tax liability to R36,000.

Seek professional advice

Consult with your accountant to ensure that you understand all the potential financial and tax implications of selling your business and ensure that the necessary legal documents are in place, such as non-disclosure agreements for potential buyers and a legal sales agreement. Ask your accountant whether you should consider employing a business broker. 

Finding fair value 

As the seller, you want to ensure that you get the best possible return for the money, time and effort invested in your business. Similarly, all potential buyers want a business that is financially stable and profitable and that will deliver a good return on their investment. 

To set a fair price, you will need to determine the value of the business, and the expertise of an accountant or a professional valuer is highly recommended. This is because there are different ways of valuing a company, as well as many factors – mostly intangible – that affect the valuation beyond simply the financial reports. 

This means choosing the right method for valuing your business is important because it will influence the price you can ask for it. The three common methods used to evaluate a business are asset-based valuations (difference between assets and liabilities, also called the book value, net asset value or equity); market-based valuations (considers comparable sale prices for businesses sold in the industry); and income-based valuation (average profit year-on-year for at least the last three years), together with a profit forecast for three or more years ahead. 

All of these valuations will be influenced by factors such as location, the condition and age of equipment and fittings, new competitors in the market, branding and goodwill, reputation and customer loyalty. 

Get your financials in order

To determine a fair value for your company, you will need a comprehensive picture of the company’s financial situation. Potential buyers, too, will want to see full financial records.

  • A minimum of 3 years – but preferably 5 years – of financial statements, audited where necessary 
  • Monthly management accounts covering the period since the most recent financials 
  • Profit and loss statements 
  • Balance sheets
  • Tax returns and assessments    
  • Tax clearance certificate 
  • A complete detailed list of plant and machinery, furniture and fittings, and equipment 
  • Complete inventory if the company holds stock 
  • Three-year financial plan.
Paperwork required

In addition to the above, prospective buyers will likely request records to assist them in conducting a due diligence, which is an investigation or review of factors that influence value or market price, some of which are listed below. 

  • Formal contracts with suppliers and clients 
  • Organisational charts and employee records   
  • Material agreements such as property lease agreements, credit agreements, and joint venture agreements 
  • Details of crucial advisors, such as accountants, attorneys and insurance brokers 
  • An up-to-date business plan, with growth projections, overheads and working capital 
  • Marketing and sales strategies, profit margins and sales targets 
  • SWOT analysis evaluating the business in the current market environment and identifying areas to increase the company’s value 
  • Statutory documents such as memorandum of incorporation (MOI), shareholder agreements and regulatory authorisations. 
Managing stakeholders

Selling a business can take months – if not years – and during this time, business owners should maintain ‘business as usual,’ while also making the business more attractive to potential buyers by establishing a clean and friendly working environment, keeping equipment well-maintained, and improving processes. 

It will also be important to manage relationships with stakeholders when it becomes known that the company is up for sale. Employee morale may be impacted if they are fearful of losing their jobs or of a change in working conditions or status. Clients may feel uncertain about receiving the same level of service, while suppliers and creditors may be concerned that the business will continue to honour its commitments. It is advisable to be upfront and honest with everyone concerned before announcing the sale or engaging with prospective buyers.

Duty of care

Among the responsibilities of business owners is the duty of care – a legal duty to take reasonable care not to cause harm when it could be reasonably foreseen. 

This duty is certainly relevant when selling a business and creates a legal responsibility or obligation not to omit any information, procedure or activity when it can cause harm to others or the business, including physical harm or financial ruin, and intangible damages such as reputational damage.

In line with this, if you are thinking of selling your business, you are well advised to enlist professional assistance from your accountant to ensure the best possible outcome for all concerned.

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.

© CA(SA)DotNews

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Read more about the article Business Loan or a Credit Facility – Which Is Right for Your Business?
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Business Loan or a Credit Facility – Which Is Right for Your Business?

“I would borrow money all day long, if the cost of borrowing is less than the expected return.” (Brad Schneider, American congressman)

At some point it’s more likely than not that your small business will require a business loan. A 2021 study done by Fundera (a US financial resource business that sources financing for small businesses) suggested that 56% of all small businesses will need a loan to expand operations, pursue new business or acquire business assets. The same study found that 29% of small businesses fail simply because they run out of capital.

Knowing that you need additional funding is not the same as acquiring it though. Other than angel investors there are two principal ways in which a company gains the financing it needs when cash flow is in short supply: a small business loan or a line of credit. But what are these? What are the differences? And how do you decide which you need for your business?

An overview

Essentially, small business loans and lines of credit are similar. They are both ways that businesses can borrow money from lenders and approval is determined based on past financial behaviour, the borrower’s credit history and their established relationship with that lender. 

A traditional loan is a non-revolving credit limit, which means the borrower will be paid out funds once and will then be required to pay the money back, with interest, at a set rate and over a set period. A loan can be granted either “secured” or “unsecured”, meaning it is either backed by collateral or not, and the interest rate charged will depend on the risk to the lending institution, with lower rates available to those with collateral. With a loan, interest accrues immediately upon pay out either in cash to the company, or through payments to other firms where assets are purchased. Examples of loans that may impact a business include car loans, property financing, debt consolidation and commercial loans, which allow companies to hire extra staff, or continue day-to-day operations.

A line of credit is different in that it offers the borrower a maximum amount that they can withdraw at any given stage and payments are made back based on the amount withdrawn and the interest accrued. Provided the borrower keeps up with the terms of the arrangement, this amount is available indefinitely and can be topped up and withdrawn at will. Generally, the interest rates on a line of credit are higher, and the amounts smaller than those offered for a small business loan. Interest only accrues when the line of credit is being used. Should it be fully paid up, then nothing is owed.

Which is right for your business?

Determining which of these loan types is best for your business will require you to look at a few factors. 

  • How much money do you need?

    If the cash injection needed is large or you need to make significant equipment, vehicle or property purchases then a loan will almost always be the correct solution. With lower interest rates and set monthly fees that are easier to account for in a monthly budget, a loan will help you secure what you need, while also keeping costs as low as possible.

    Credit lines are better when the amounts needed may be smaller, but more frequent. It is therefore vital for you to know exactly what money you need, and what you intend to use it for before you approach the lender.
  • How do you plan to use that money?

    As one-off payments or cash injections, loans don’t allow a lot of space for adjustment after they are issued and rarely offer any form of protection in difficult conditions. 

    A line of credit can, however, give you access to extra working capital with no restrictions. Having a line of credit ready to go when needed is a good way to ensure small, unforeseen problems can be negotiated. Late payment by a critical client shouldn’t mean you can’t pay your bills on time. 
  • What kind of flexibility do you need?

    Lines of credit offer a great deal of flexibility for you assuming you’re not sure how much money you will need, or if you expect your expenses to be spread out over an extended period. A line of credit also offers options when it comes to monthly payments, as, provided you meet the minimum payment, you can pay back as much or as little as you can afford. 

    Loans, however, provide the better option when flexibility is not an issue, and your main aim is to limit the amount of debt you take on.

Before applying for any business credit, it’s advisable to speak to your accountant to evaluate just what needs to be accounted for in the financing and what you can reasonably expect to pay back each month. Knowing exactly which potential costs are going to be vital to assist your company’s growth, and which are nice-to-haves, will enable you to make the right decisions when it comes time to choose what kind of financing you are looking for.

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.

© CA(SA)DotNews

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Read more about the article SARS Can Take Money from Your Account! Here’s How to Prevent It…
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SARS Can Take Money from Your Account! Here’s How to Prevent It…

“[Taxpayers] should give at least the same priority to tax obligations as their other responsibilities.” (SARS’ Short Guide to the Tax Administration Act)

SARS has wide powers when it comes to the collection of tax debts and just one of these is the power to collect money owed by taxpayers from third parties who hold money for those taxpayers, such as a bank. This means that SARS can indeed take outstanding tax amounts from a personal or business bank account without your consent, by instructing the bank to pay the amount outstanding over to SARS through a process called Third Party Appointment (TPA). The same instruction can be issued by SARS to other third parties that hold money on behalf of a taxpayer, such as an employer, a customer, an insurance company, or an attorney. 

Given the  significant negative implications this could have for a taxpayer, whether an individual or a company, there are certain procedures SARS must follow before it can collect tax debt via a third party appointment or another collection method, and individual and business taxpayers are well advised to understand how a tax debt can arise without their knowledge, and how to prevent SARS from collecting such tax debt from their bank accounts without their consent.  

What is a tax debt? 

While filing correct returns and making payments on time will protect taxpayers from tax debts, penalties and interest, taxpayers may not be able to meet these requirements on time for a range of reasons. 

As such, administrative penalties on late or non-submission of tax returns, failure to submit tax returns, the submission of returns without payment, or partial payment of a tax liability can all result in a tax debt, which can also arise from a SARS assessment, or from an audit.

How can a tax debt be collected? 

SARS’ powers to collect tax debt are extensive, and include: 

  • Recovering tax debt through third parties who hold money on taxpayers’ behalf, such as banks, employers, customers, insurance companies or attorneys. If such a third party fails to adhere to the appointment, the third party can be held personally liable to SARS and may be convicted of a criminal offence.
  • Issuing a judgement and having a taxpayer blacklisted. 
  • Obtaining a preservation order in respect of taxpayer assets. 
  • Attaching and selling taxpayer assets.
  • Bringing sequestration or liquidation proceedings against a taxpayer.
  • Holding directors, members or related parties liable for the company’s tax debt.
When can SARS collect tax debt? 

If you cannot pay a tax debt to SARS and do not follow the correct procedures, SARS is legally allowed to exercise its powers of collection as detailed above, even if you are disputing the debt! 

Fortunately, SARS must also follow the correct procedures. These include that the taxpayer must have received an assessment from SARS detailing how much is due and by when, as well as a final demand for payment that states available debt relief mechanisms contained in the Tax Administration Act (TAA); and recovery steps that SARS may take if the tax debt is not paid. 

Only 10 business days after delivery of the final demand, if no response has been received from the taxpayer, can a senior SARS official authorise a third party to collect the tax debt. 

If SARS does not follow these steps detailed in the TAA, collection proceedings may be regarded as illegal and in contravention of the TAA and the taxpayer will have recourse against SARS via its Complaint Management Office (CMO), the Tax Ombud or legal action.

But, of course, prevention is far better than cure. 

How to prevent SARS from taking money from your account 
  • Keep tax affairs up to date – SARS says that when deciding the most appropriate way to deal with outstanding tax obligations, it will give considerable weight to the tax debtors’ individual circumstances and compliance history of, for example, lodging correct returns and documents, and paying taxes on time. 
  • Update your details with SARS – SARS is required to inform taxpayers of assessments, notifications or communications issued by also sending a message to a taxpayer’s last known number or email address. This makes it crucial to keep your contact details updated at SARS to ensure you receive these communications timeously. Many taxpayers miss pertinent notifications and letters of demand because they did not receive notifications or discovered these too late in an unattended mailbox. 
  • Proactively monitor for unexpected tax liabilities – A tax debt can arise for many reasons as explained earlier and can also be due to errors or omissions made by the taxpayer, a tax practitioner, or even SARS itself, or could be caused by missed communications or incorrect payment allocations. For this reason, individuals and businesses should check their compliance status with SARS and obtain a statement of account on the various taxes payable from their accountant, both proactively and on a regular basis, and certainly every time an email or SMS is received from SARS.
  • React professionally and swiftly to communications – All communications from SARS should be prioritised for immediate action, particularly those informing a taxpayer of a tax liability or demanding payment, even in the case of an obvious mistake. Whether the tax debt is disputed or not, SARS must be engaged legally, and it is crucial that the correct procedures are followed.
  • Understand the options – There are, fortunately, ways to make arrangements with SARS to settle a tax debt and to avoid the debt collection process that can include money being taken from your bank account. 

    For example, taxpayers who can prove serious financial hardship can apply to SARS for a reduction of the amount within 5 business days of receiving the final demand or extend the period over which the amount must be paid. If the debt is to be disputed, taxpayers can apply for a suspension of payment. Where the tax debt is not disputed, but cannot be settled immediately, taxpayers can either apply for a payment arrangement over time; or can request a debt compromise.
  • Beware the “pay-now-argue-later” principle – Objecting to a tax debt does not suspend the obligation to pay it. The only way to prevent SARS’ collection process from continuing when formally lodging an objection is to also formally request a suspension of payment. SARS collection procedures are suspended between the dates that SARS receives the request until 10 business days after SARS’s decision to grant the Suspension of Payment request. However, interest will accrue on the unpaid debt. If SARS denies the Suspension of Payment request, the taxpayer can apply to SARS for a payment plan. 

In all these instances, professional assistance is strongly recommended. 

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.

© CA(SA)DotNews

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Read more about the article Don’t Let Fraud Infect and Damage Your Company
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Don’t Let Fraud Infect and Damage Your Company

“In a way, fraud in business is no different from infidelity in marriage or plagiarism in scholarly work. Even people committed to high moral standards succumb” (Miroslav Volf, Director of the Yale Center for Faith and Culture) 

Fraud (in this context) is the act wherein an employee or trusted partner makes a financial gain through criminal behaviour or deception within an organisation and it is extremely common. Recent studies suggest that as much as 46% of all companies will succumb at some stage or another. Given this, much thought has been put into how to prevent fraud and lower the impact that it can have on a business. Unsurprisingly, the issue is extremely complex and there is a lot that you as a business owner will need to do if you want to avoid the financial loss and reputation damage that fraud can cause to your business. 

What is fraud?

Business fraud has many aspects, and generally comes in three defined categories:

  • Asset Misappropriation 

    This is the most common type of fraud. Some numbers suggest that 90% of all fraud is this kind, in which employees will either steal or exploit their company’s resources. Examples include where employees make false expense claims, help themselves to cash or even non-cash items, the creation of ghost employees, “buddy clocking” systems or under recording of the cash that is received for goods.
  • Financial Statement Fraud 

    Significantly less common than asset misappropriation these schemes are, however, significantly more damaging to the company itself. This is the deliberate manipulation of financial statements to mislead those who would use those statements for legitimate purposes. Usually, this is done to make a company appear more profitable than it is, or to avoid tax payments. 
  • Corruption

    Corruption occurs when employees use their influence or positions in a company to benefit themselves to the cost of the company or agency for whom they work. An example of this would be when someone agrees to hire a less than ideal candidate because they are being paid a kickback to do so.
Tips for detecting and preventing fraud
  • Know your employee

    According to the Association of Certified Fraud Examiners the average fraudster will operate their scheme for 18 months before getting caught. The reason for this according to employers’ reports is that quite often it was the employee they least suspected

    It is therefore vital to have regular feedback sessions with employees, even those who have been with the company for a long time, to discuss their personal circumstances and be aware of any significant changes in their lives. Someone who has been a model employee for years, may, due to changes in their life’s circumstances, feel they have no choice but to steal to make ends meet. 

    Look for those employees whose habits have suddenly changed or who exhibit a change in attitude. These habits can point to problems in their personal lives, or potential bitterness at their employer resulting from perceived slights they may have received, such as a poor raise, or lack of promotion.
  • Fraud policy

    Set up a fraud policy and communicate this to all staff. Staff should be aware that management is fully clued up on all the types of fraud, knows what to look out for, is actively searching for it and that the punishments for being caught will be severe. 

    In doing this you also trigger honest employees who are not tempted by fraud to become aware of the signs and symptoms of fraud and empower them to report suspicious behaviours to you. Refer also to ‘Be Available’ below.
  • Internal Controls

    This is potentially the most important step as it is not subjective. It is extremely important to set up systems within your company which safeguard the company’s assets and ensure the integrity of record keeping. The first step is to make it abundantly clear to whom responsibility lies in each situation. Do not, for instance, leave the key to the petty cash in a cupboard, but rather assign one staff member to take full control and sign for all expenses and payments into the cash box. 

    Use a paper trail and have those responsible for each transaction or sale personally sign for each element of their part of the process. If the preparation of bank deposits is personally signed for in a ledger that is then passed to a manager, then it becomes much harder for either of those parties to deny their role in the process. 

    Make sure all payments are authorised, that purchase orders and invoices are numbered consecutively and cross referenced to prevent the passing of false invoices. Require new vendors and employees to be personally vetted and authorised by a senior manager to stop ghost accounts from being set up. Require two signatures on any payment above a minimum amount. 

    Internal controls need to be re-examined regularly and any discrepancies with the procedure followed up with rigorously. Don’t be afraid to bring in an external team to set up these procedures for you should you not have the means to do so yourself.
  • Watch those who take no leave

    This may sound strange to anyone who has never dealt with fraud, but one of the surest signs that something suspicious is going on is if an employee never goes on holiday. On the surface, these employees may appear to be diligent hard workers, but the truth is much more likely that they are afraid of having their schemes uncovered should they allow someone else to do their jobs when they are on leave.
  • Be available

    Your best line of defence is your other employees. Being the kind of business owner who has an open door, is approachable and who listens is the best way to ensure that honest employees come to you if they have any suspicions. They should know that you are trustworthy, and that their names will never come up in any discussions you have with the people they have pinpointed. At the end of the day, having everyone looking out for you, is much better than trying to do it all yourself.
  • Work with reputable partners

    Companies do not operate in a vacuum. Many of the services you use may need to be brought in from the outside and when it comes to your finances it’s vitally important that these companies are reputable. Good bookkeeping services will be at the frontline of defending your company from fraud and will be able to quickly pick up discrepancies in the books. Therefore, when hiring any professional who will have access to your accounts and books it is vital that they be registered with the relevant professional bodies and that they come with a reputation for integrity and providing top-class service. Ask your accountant’s opinion in any doubt.
  • Do spot checks

    Once a month pick random employees and go through their expense accounts, travel allowances and claims for cell phone usage to make sure that these are on par with what is expected and do not ring any alarm bells. If they have signing powers take a close look at what they are signing and the reasons and flag any unusual signatures for a follow up. Even if you only do this for one employee a month it will be known that you are checking, and that any fraudulent activity will ultimately be caught. 
  • Reconcile 

    Reconcile your bank accounts at the end of every month. Ideally, this should be done by an independent person who does not have bookkeeping or cheque signing powers within the company. This person should also check invoices and payments (EFT or Credit card) to make sure they are cross referenced. 

    They should then sign off on the reconciliation personally.

It is impossible to close all the gaps that fraudsters may use to take advantage of your company, but if you implement the above changes and controls you will either deter them from trying or find them quickly once they have started. The best tip is vigilance, both by you and your honest employees. Building an honest and open company culture that fosters communication will ensure your employees are both aware of what needs to be done and open to telling you when it isn’t.

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.

© CA(SA)DotNews

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Your Tax Deadlines for November 2022

  • 7 November – Monthly PAYE submissions and payments
  • 25 November – VAT manual submissions and payments
  • 29 November – Excise Duty payments
  • 30 November – Value-Added Tax (VAT) electronic submissions and payments & CIT Provisional payments.
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