VAT Debts – Imputation of Personal Liability Enshrined in Law
With VAT being the highest contributor to the undisputed debt book, non-compliant business must be aware that the imputation of personal liability, is already enshrined in our tax laws. This would be triggered and apply to any person who controls or is regularly involved in the management of the overall financial affairs of the company, where the person’s negligence or fraud resulted in the failure by the company to pay its tax debts.
The tax laws do not specifically presuppose the existence of formal responsibility in respect of the finances of the company. They instead merely require that a person exercise a degree of control over or regular involvement with its overall financial affairs.
Specifically, the ambit of section 180 of the Tax Administration Act, 28 of 2011, therefore, also relates to those persons who exerted a form of pre-emptive or informal control over the financial affairs of the company, which may include shareholders, directors and other persons who were factually involved.
Contravention of tax laws not only tarnishes an individual or company’s reputation but can also result in hefty financial penalties, legal repercussions, and potential incarceration.
Criminality of Non-Compliance
Section 234 of the TAA outlines the acts, and omissions which SARS consider as criminal offences, relating to non-compliance with tax Acts. This section further states that any person who willfully commits one of the listed acts, or willfully / negligently fails to act, may be liable, upon conviction, to a fine, or imprisonment of up to 2 years.
This is only the tip of the iceberg however, as Section 235 of the TAA goes even further, speaking to tax evasion, and obtaining undue refunds through fraud or theft. This comes with a 5-year potential imprisonment:
Therefore, the ultimate burden lies with the taxpayer to discharge, when a tax debt is owed, including why they should be eligible to request the much-needed financial reprieve from SARS, and keep their heads above water.
There are various tax relief measures which SARS has made available to assist these drowning taxpayers.
Prudence of Legal Professional Privilege
When you venture into the realm of navigating your complex and high-value SARS Tax Debt, essentially one of the most important decisions you will ever take, the integral starting point is ensuring your chosen representative provides you with legal professional privilege on all sensitive information shared.
Where the tax debt owed is in the millions, SARS are often aggressive in collections, and having an attorney with trial advocacy experience under their belt gives you an undisputed edge in negotiating on the legal papers submitted. Beyond this, where the correct legal course of action per the TAA is followed, you will not be subjected to funds withdrawn from your bank account, without your consent.
Whilst you may be legally protected, your tax attorney is best complimented with an astute accountant or tax returns specialist, knowing the ins and outs of compliant legal disclosure, whilst mitigating financial harm.
Compromise Your Crushing Tax Debt
It is also important to take cognisance of the tax debt relief measures as contained in the TAA, as where a taxpayer does not have legal merits to pursue an objection but has difficulty in settling their tax debt. In such cases, a Compromise of Tax Debt application (“the Compromise”) is always available to the taxpayer.
The Compromise is aimed at aiding taxpayers to reduce their tax liability by means of a Compromise Agreement, which is entered into with SARS. Where SARS is approached correctly, and the taxpayer’s financial circumstances warrant it, a tax debt can be reduced, and the balance paid off in terms of the Compromise.
In the end, total tax compliance is the ultimate goal, be it through the rectification of an error by SARS or securing a settlement which is more affordable to the taxpayer in a given instance.
Enlist the “A-Team” – Seasoned Tax and Legal Experts
It is easy to be unaware of the full financial risk faced when dealing with SARS, but it is important that taxpayers have cognizance and understanding when it comes to a tax debt; what it means, how it comes about and how you can disarm SARS, before the fatal blow is dealt.
Additionally, section 256(3) of the TAA enables taxpayers who have successfully concluded either a Deferral of Payment or Compromise of Tax Debt agreement to apply for a tax compliance pin, despite their tax debt.
Law abiding taxpayers who seek to address their tax debts are able to remedy their non-compliance and save their businesses by playing open cards with SARS. Enlisting the help of a strong multi-faceted tax, legal, and financial team – the “A-Team”, will assist businesses to navigate the intricacies of the tax debt relief mechanisms, and simultaneously stave off bankruptcy. It is vital that taxpayers take action sooner rather than later, before SARS comes knocking.
