The tax industry over the last few years has changed dramatically and it is clear that there is a huge drop in administration efficiency of SARS but an increase in collection efficiency.This is because we as tax practitioners have to spend hours to seek correction of all errors in assessments (on average only 30% of assessments are correct), balance of accounts, misallocations in payments, and proof that any return was lodged since even some 10 years ago.As you all know, SARS has become very aggressive in their approach over the last year: especially with regards to holding the Tax Practitioner accountable/responsible for negligence should anything go wrong or mistakes be made on tax returns, financial statements, VAT under-declared and PAYE differences. We have listed all the risks on our website – Please acquaint yourself with these.With all the risk implications for Tax Practitioners, SAICA has published a document dealing with a number of risk issues. We requested an external assessor to assess our risk profile and they made relevant recommendations.We therefore have adjusted the prices for our tax services dramatically, based on SAICA’s and our assessor’s recommendations, to contra these risks and recover some of the time we spend at SARS offices. We will also implement some strong controls (starting for this tax season already) to balance our risks, including a new taxation software system already implemented that works on an interface with SARS’ network. This will improve our level of service to you, our valued client.
WHEN PRACTITIONERS COULD POTENTIALLY INCUR SOME LIABILITY
In the Tax Practitioners Guide there is a section which deals with when practitioners could potentially incur some liability. The points below come from the guide.
1. If a Tax Practitioner signs are turn without reasonable grounds for believing it to be true, or if they make use of any “fraud, art or contrivance is used”, (see Section 104 of the Income Tax Act – Appendix B). It would be a good idea for the Tax Practitioner to establish some reasonableness tests to establish the reasonableness of the data been submitted on the tax return. It could be that a capital reconciliation exercise would be a reasonable exercise to establish that the living expenses are reasonable.
2. If Tax Practitioners use the electronic or digital signature of another person without their consent and authority.
3. If a Tax Practitioner does or omits to do anything that he is intended to, enable or assist a taxpayer to avoid or unduly postpone the performance of any duty or obligation imposed on imposed on the taxpayer. It could be the late rendition of a tax return in order to reduce the next years provisional tax could fall foul of this.
4. If a Tax Practitioner’s negligence results in the avoidance or undue postponement of the performance of a duty or obligation imposed on a taxpayer. Again the late rendition of a tax return in order to reduce the next year’s provisional tax could fall foul of this.
5. If a tax Practitioners action or omission constitutes a contravention of a rule or a code of conduct laid down by the controlling professional body. Remember the Tax Practitioner Act still has to be implemented.
6. Action by SARS will only be taken if it is clear that the Tax Practitioner is guilty of a serious or persistent dereliction of duty involving dishonesty or subterfuge or the circumstances indicate an intention to obstruct or mislead SARS.
We urge you to acquaint yourself with our new engagement letters:
SAMPLE VAT ENGAGEMENT LETTER
This letter is prepared for the whole group.
We are pleased to confirm the arrangement for Enslin & Associates to provide the Value-added- taxation services for:
Mr AB Smith
Fastpaper Services (Pty) Ltd and
Fastpaper Services Holdings (Pty) Ltd as set out in this letter.
You have requested us to assist you in the preparation and submission to the South African Revenue Services (SARS) of your monthly/bi-monthly VAT returns, to submit the returns according to the time specifications that SARS have stipulated, and to review related VAT assessments for correctness.
You have also requested us to assist you to respond to queries from SARS and to errors in assessments identified by our review of assessments and to a lodge the appropriate objections where considered necessary.
The work to be performed will be based on our interpretation of the tax law at the relevant time. These tax laws are subject to change occasioned by future legislative amendments and court decisions. You are cautioned to keep abreast of such developments and are welcome to engage our service again for this purpose.
We confirm that it is your responsibility to provide us with complete, reliable and accurate information in respect of your VAT affairs in order for us to provide the required services.
- Original expense invoices (no faxes or quotations)
- Original income invoices
- All bank statements for the period
Please take note that as a VAT-vendor, you are only an agent to SARS and using the VAT income as part of your own cashflow is a federal offense/fraud and you could be imprisoned for this.
If our calculations therefor show that you have to pay over VAT, and your cashflow for some reason does not allow this, you will sign an indemnity to release our risks and we will still file the correct amount due and payable. This will result in an underpayment on your profile.
It should be noted that all VAT returns are filed on an electronic basis using the SARS eFiling system, and in this regard we require your mandate for Enslin & Associates to register as an eFiler on your behalf. Once this is done the following terms and conditions in regard to eFiling shall apply.
Enslin & Associates the eFiler acts as a duly authorised agent on your behalf.
- You will be liable to SARS for the due and timeous fulfilment of all your obligations towards SARS.
- Any information submitted by Enslin & Associates to SARS by means of the eFiling service will be based on information received from you and you are responsible for ensuring that such information is true and correct.
- Before we submit any information to SARS by means of the eFiling service we will need your confirmation that the information being submitted is a true and correct reflection of what you have provided.
- Enslin & Associates has disclosed the minimum conditions for the mandate to you and,
- Where SARS changes the conditions of eFiling on their website, the effect of such changes will take three months. Enslin & Associates will disclose any change and minimum conditions within the three month period to you.
In regard to VAT periods, we will be processing your VAT forms on an electronic basis, which means that at least ten days prior to the deadline/payment date which will be around the 20th of the month, we require ALL your documents for processing and one day before payment, confirmation that you agree with the payment to be made.
If we have not heard from you confirming your payments by such dates we have no alternative but to assume that you accept the proposed payments prepared by us. We will then proceed with the electronic submission of such returns. Please bear in mind that the payment in regard to these tax returns remains your responsibility.
Please note that if we also do the calculations for you PAYE, we require your salary information by at least the 23rd of the month, and it will be paid by the 7th of the following month. The same rule applies.
In regard to the filing of your tax returns which will be done on a totally electronic basis we will provide you with a set of reports which will indicate the income declared (output) and expenses claimed (input) and after you have confirmed in writing or by signature that you are happy with the figures we will then proceed with the submission of these returns.
Please be advised that we will not file any of your returns unless you have signed and returned a copy of this engagement letter to us.
You may well be aware that during October 2009 SARS announced the imposition of administrative penalties which results in a new penalty regime which began on the 23rd November 2009 imposing a penalty on a monthly basis based on a table of income. This penalty will be imposed every 30 days provided the non-compliant act is not sorted out.
Compliance now means that simple things like having the correct physical address on your VAT return or the correct e-mail address could result in a penalty. In the event that any of the information changes and you do not advise us of these changes timeously we cannot be held responsible for the imposition of any of these penalties. This would also apply to the latest information required for the completion and submission of your VAT returns.
At the beginning of the season we will advise as to which date it is necessary for you to get your information to us. If you are unable to comply with this date please advise us beforehand so that we can reschedule your work. We will not be liable for penalties and interest on your account if your VAT submission is late as a result of you not delivering the information to us in time.
Our fees which may be billed as the work progresses are based on the degree of responsibility and skill involved in the time necessary to conduct the work plus reimbursement of our expenses and VAT.
You shall pay our fees without any right of setoff on presentation of our invoice. We will be entitled to charge interest at the prevailing time overdraft rates on a monthly basis on all amounts outstanding on our fees for whatsoever reason older than 30 days from the date reflected on our invoice.
In the event that there is a damages claim against us the damages computed cannot be more than twice the fee.
Without prejudice to any other rights that we may have in law we reserved the right to suspend or terminate the performance of the service of any part thereof to you immediately, at any time, without notice, should payment of any of our fees be overdue.
Enslin & Associates Chartered Accountants SA