SARS eager to pounce once amnesty ends

With the deadline for the tax amnesty for small businesses rapidly approaching on 31 May, eligible businesses and individuals should apply quickly or face the strong possibility of being prosecuted, warns David Knott, a fiduciary specialist BoE Private C

"We believe that the Enforcement Unit of the South African Revenue Service (SARS) is eagerly  awaiting the close of the amnesty period, as they have identified several obvious businesses outside of the tax net they are keen to make an example of," says Knott. "There are certainly  many that have not registered for tax or whose records do not reflect an accurate turnover."

Those businesses failing to take advantage of the amnesty, or those who do apply but fail to disclose fully, will be liable for all taxes, levies and duties plus penalties going back as far as SARS may care, he cautions. Criminal prosecution may also result.

"SARS has so far received over 16,000 amnesty applications," Knott points out. "We would encourage other small businesses that may have been economic with their tax affairs to follow their lead and take advantage of the generous relief offered by SARS. Consult with your tax advisor at the earliest opportunity and complete the necessary documentation."

Knott says there are many reasons why businesses may have run afoul of the countrys tax  laws, varying from not wishing to support the previous government, to lack of knowledge as to how to register, to cash flow problems or even to "blatant dishonest tax evasion".

As with the Forex Amnesty, a special SARS unit has been established to process applications  in strictest confidence. The amnesty is available to any individual or entity such as an unlisted  company, close corporation, co-operative or a trust having natural persons as beneficiaries,  that carries on a trade or business with a turnover of less than R10 million in the 2006 year of assessment. All forms of tax are covered by the amnesty - income tax, VAT, PAYE, Skills  Development Levy, UIF contributions, and secondary tax on companies.

Not everyone is eligible to apply, Knott points out. "The amnesty does not apply to purely salaried persons; one must be running a business. Neither does it apply to any tax or penalty  that has already been assessed or paid to SARS or becomes payable as a result of any  return already submitted. The relief will not be granted if the business is already the subject of an investigation, audit or other enforcement action by SARS. Neither will amnesty be allowed where this relates to VAT not paid as a result of a false declaration relating to a fictitious transaction, or 'aggressive' evasion rather than passive evasion."

Applications for amnesty are pretty straightforward, he adds. "One needs to complete a form SBA001 and to forward this together with a complete and accurate 2006 tax return and a statement of assets and liabilities to the Amnesty Unit. If records are insufficient to reflect exact figures, a best estimate must be provided, but the documentation must clearly reflect that an estimate has been furnished. The application must be made before 31 May, 2007, in order to qualify."

The cost, says Knott, is modest. "One must pay the full assessed 2006 tax plus a levy applied on a sliding scale commencing at 2% on the taxable business income above R35, 000, rising progressively to R15,800 plus 5% once this income exceeds R500,000 - a pretty modest cost when one appreciates that SARS will not seek to go back into previous tax years.

"Amnesty will be declined if the application is not lodged on time, or if SARS ascertains that there is not full disclosure. Although previous returns may have been fuzzy, the 2006 tax return must be truthful," the specialist concludes.