/ 16 January 2022

Small businesses must be proactive in their tax affairs

Tax Relief Favours Small Business

The North Coast of KwaZulu-Natal inspires with its complex palate of greens. From lush wood forests, and sugar cane fields to a cornucopia of fruit trees. My favourite is that of the young mango, which, when sliced and salted and offered up with vinegar and curry powder, serves as a time travel device to childhood. I recall devouring bite after bite, sitting in a tree, as my little feet gently pendulum swung in ecstasy.

But the ubiquitous fruit is not only the stuff of memories, it is also the star of parables. To be green is to be in a state of learning and evolving toward the ripeness of experience and wisdom.

As an entrepreneur you typically start out green. There is a lot you don’t know. You believe that the sheer beauty of your business idea is what will make it thrive and grow into a thing of stature and success. Sometimes we become so enamoured with the innovation, idea, or creation that it takes all our focus. The reality is that your business can only really grow and scale when the back end is correctly looked after. Accurate accounting, administration and record keeping are the supporting stars of a successful business.

It is important that if you lack basic bookkeeping skills you may need to hire one or bring in the services of an accountant or tax practitioner. This does not mean you get to leave it all in their hands while you concoct your next move; in the end it is still your responsibility to ensure you remain tax compliant with the South African Revenue Services (Sars). And here is where many lose the plot. When it comes to company taxes, like most financial tasks, it comprises numerous tax types, including VAT and PAYE, together with multiple regulatory obligations. Failure to comply with the regulations could expose a small or medium business owner to a build-up of unpaid taxes, resulting in liability compounded every day by penalties and interest.

I was commiserating with another business owner recently, discussing how this is a pitfall others fall prey to, typically because they left the responsibility to someone else, were ignorant of the process or too busy firefighting on the shop floor. In many instances finding oneself liable or non-compliant can threaten your survival or almost certainly deal a fatal blow to your business.

We resolved that sharing the gospel of compliance and understanding of how this all works is an important crusade for us at the coal face of small, micro and medium enterprises (SMMEs) as an important propeller of our country’s economic growth. So what do we need to know and how do we stay compliant so that we can secure the contracts or land crucial funding to grow our enterprises and shrink the ranks of the unemployed?

How do we become proactive, in correctly handling our tax affairs, especially if we have to remedy non-compliance? One of the ways is to ask those who know. Jashwin Baijoo, the legal manager at Tax Consulting South Africa, advocates staying tax compliant from the outset. And here’s his five point plan on how you do that.

1. Ensure you are registered for corporate income tax, skills development levy, PAYE, UIF and VAT, if your annual turnover is projected to exceed R1-million.

2. Submit all your return types on time on their correct dates, and the bi-annual EMP501 (employees’ earnings) reconciliations if required.

3. Double-check all calculations pre-submission, even if they are completed by a qualified accountant or tax practitioner. Remember, the buck stops with you as the business owner.

4. Settle any liability rightfully due to Sars, as and when it is raised. This avoids the levying of interest and penalties.

5. Finally, should you disagree with a liability claimed by Sars, or be unable to afford it, consult a tax attorney immediately as we find Sars quite amicable in instances where the correct legal course is followed.

But let’s say you misstepped, overlooked or just didn’t know all these things and Sars is knocking on your door, either through a Letter of Final Demand “(the Demand”), a third party appointment or some other means of collection.

You can either become paralysed by the fear of how you will pay what’s due and whether Sars will attach your property or drain your account, measures which Baijoo says they are legally entitled to, or you can take some action.

He explains there are numerous means by which errant taxpayers can start the new year on a clean slate, with the most cost efficient of them all being a Compromise of Tax Debt application (“the Compromise”).

“This is aimed at aiding taxpayers, both SMMEs and individuals alike, in reducing their tax liability by means of a Compromise Agreement (“the Agreement”) and helping to keep the cash constrained taxpayer afloat until some financial reprieve is in sight,” says Baijoo.

Baijoo adds that where Sars is approached correctly, and with strong merits, a tax debt can be reduced and the balance paid off in terms of the Compromise, allowing some much-needed breathing room and helping SMMEs all over the country to become tax compliant and remain a going-concern for the foreseeable future.

So, I hope this goes some way in helping you not only stay afloat, but helps you harness your engines to travel this sometimes unknown and seemingly unnavigable path. Good luck.