Letting your kids use your old computer isn't so innocent - it comes with Vat implications!
25 June 2014
Posted by: Author: Simangele Mzizi
Author: Simangele Mzizi (FSP Business)
Let's say, you're a sole trader and you work from
home. You decide to buy a new computer and you give the old one to your
children to play games on.
Sounds innocent enough. But did you know doing this
comes with VAT consequences!
If you take or use goods from your VAT-registered
business for your own use, or 'self supply', you need to make an output tax
calculation and pay the VAT over to SARS!
If you ever find yourself in a situation where you
have to use goods from your business, take these three steps to account for VAT.
If we use the above example of a sole trader who
gives his children his old computer, the implications are that he must
determine the market value of the old computer, apply the 14/114 tax fraction
to it and declare the output tax amount
on his VAT return according to the below steps:
Step #1: Determine the
market value of the business stock you're appropriating for your own personal
Step #2: Apply the tax fraction
(14/114) to this market value. This will give you the amount of output tax you owe SARS for taking this stock out of your
business for your personal use.
Step #3: Enter the
specifics of the calculation you've made and the resulting amount of
output tax you'll pay to SARS in blocks 10 and 11 of your VAT return.
Important: You must keep
your notes or papers to prove to SARS that you've declared output tax on private use.
There you have it. If you take or use goods from
your VAT-registered business, you must account for VAT. So don't invite
penalties and interest for failing to declare and pay output tax!