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For the past two years, SARS has been on the warpath, taking harsh action against those who fail to meet the standards for tax compliance.

The pandemic has thrown a wrench into how businesses operate, and while the revenue service has updated the submission dates for tax season, they’re still enforcing strict guidelines for taxpayers.

Their methods for tax collection, however, have come under scrutiny in a recent case heard in the Pretoria High Court.

According to BusinessTech, the court ruled in favour of the applicant, who claimed that SARS had issued a letter notifying the taxpayer of outstanding debt on their account, and bringing in a third party to collect it, before the expiry date for payment stipulated in the assessment notice.

The High Court had to decide whether that notice (issued prior to the due date) constituted notice in terms of S179 of the TAA, and whether such notice was sufficient to entitle SARS to appoint the bank as an agent to collect on the deemed outstanding tax debt.

While the High Court acknowledged that the debt still needed to be settled, SARS must repay the monies collected from the bank account of the taxpayer.

However, it also highlighted the purpose of S179 (5), which required notification was introduced to limit the powers of SARS in recovering outstanding tax debts.

To ignore the provisions of S179 (5) for the sake of process would be condoning an unlawful process and render the provision superfluous.

To put things simply, the court ruled that taxpayers have the right to be notified before SARS goes ahead and appoints an agent to collect the outstanding debt.

This gives the taxpayer time to settle the debt, and in doing so avoid expensive litigation to rectify the situation.

Before SARS can bring in a third party to collect on the debt, it has to take the following into account:

• There must be a tax debt;
• The due date for payment of the tax debt must have expired;
• A letter of demand must be delivered to the taxpayer at least 10 days prior to issuing a notice to a third party who holds monies for and on behalf of the taxpayer concerned;
• The letter of demand delivered to the taxpayer must set out the recovery steps to be taken should the tax debt not be paid; and
• The letter of demand must also specify the relief mechanisms available to the taxpayer.
• The Commissioner is therefore obliged to notify the taxpayer of its intention to use collection methods (such as appointing an agent) before making use of such provisions.

Of course, the easiest way to avoid all of this is to ensure that you are tax compliant.

Tax season for provisional taxpayers is set to start on September 1, 2020, so there’s no time like the present to get your affairs in order.

If the legalese and tax laws give you a headache, hand things over to an expert.

Galbraith | Rushby offers professional tax compliance and advisory services to individuals and businesses.

They’ll do the work of ensuring that your taxes are in order and compliant with the latest laws and regulations.

[source:businesstech]