Many tax payers think that SARS, assessments and action cannot be challenged! Whilst most tax assessments are correct, it is a fact that SARS can, and do make mistakes. SARS will also overlook, wrong, inflated tax returns, and not audit, if the amount assessed is to their benefit.
Here follows some matters and disputes that were settled, to the advantage of the taxpayer client. For privacy, names of taxpayers are withheld.
• Tax payer A- S11(a) Income Tax Act, allowable deductions
A taxpayer was assessed for R400 000.00. Deductions were not processed, we objected, corrected the return, and the tax debt was reduced to zero. In fact, the final result was a refund due to taxpayer of R20 000!
• Tax payer B- S11(a) & S11(e)
The taxpayer received a final demand of R300 000.00 and a threat of legal action.We identified the following; Section 11(a)
(a)”Expenditure and losses actually incurred in production of income, provided such expenses are not of a capital nature.”
b) Municipal charges to the value of Rx, overlooked/included somewhere in the calculation. Either way it is not debatable. The municipal expenses were incurred, to derive income for the “rent collection, property investment company.
c) Project and contractual expenses.Information was furnished in this regard, but excluded, or only a portion allowed. It was not of a ‘capital nature”,
d). Wear and tear(Section 11e) read together with Practice Note 19. Completely overlooked, and “depreciation’’ used to calculate wear and tear, in complete violation of the Practice Note 19 Prescription. Our wear and tear calculation was Rx.
• Taxpayer C-Judgement, unfairly obtained
A tax return was wrongly completed, resulting in a final tax, of R150 000.00. SARS obtained a judgement against the taxpayer.On perusal of the tax return, we noticed that the assessment was not relevant and the taxpayer was not liable. We duly objected and the amount was reversed! Judgement against taxpayer, rescinded!!
• Tax payer D-(a) Income Tax Act, allowable deduction
A Taxpayer was assessed for R1000 000.00. All deductions overlooked, we motivated our case for deductions to be claimed, all of them were allowed, and the corrected, resulted in a nil assessment!
• Tax payer E
Same scenario as above, but the amount was R500 000.00
• Tax payer F-S179 of The Tax Administration Act Challenged
A bank was appointed as an agent in terms of section 179 of the Tax Administration Act.
R308 000, was debited, from taxpayers account. After Sars could not prove this debt, we advised our client to withhold taxes until SARS could explain this anomaly. Additional tax debt, shot up to R430 000.00 Total Liability, R738 000.00. After numerous letters and threats of High court action, SARS was forced to investigate its actions. The R308 000 was offset against the R430 000 debt. SARS had to concede the R308 000 debt never existed!
• Taxpayer G-Capital Gains Tax
After a court settlement for a members share, the taxpayer was audited and slapped with a R3million tax bill. Our investigations revealed that ,whilst SARS correctly assessed the “capital gain” of the share gain, and understated income, SARS “double taxed the capital gain, and did not use the applicable under tstatement penalty prescriptions. Intense number crunching and negotiations resulted in SARS reversing the double taxation, and reducing the understatement penalty. Final reduction, R2000 000!
These are only a few examples. Space donot allow me to elaborate on all our cases.
If you find yourself in a similar predicament, don’t hesitate to contact us. We can take on any tax matter with the seriousness it deserves.