Whether client non-compliance creates any SARS obligations for tax practitioner
02 April 2014
Posted by: Author: SAIT Technical
Author: SAIT Technical
The answer to this query is based on legislation as at 2014/04/02.
have a client whom we registered for VAT about 12 months ago. Since
registration, the client has refused to declare his VAT payable, even though
we have advised him to do so. My question is whether this creates a liability
towards my firm? Should we inform SARS of his non-compliance and can our firm
be held responsible for not declaring his non-compliance to SARS?
A: Although a taxpayer
may make use of a tax practitioner, the ultimate responsibility still rests
with the taxpayer to ensure that its tax affairs are in order. The only instance
in which a firm can be held liable is when the engagement letter stipulated
that the firm would, for example, submit the client’s VAT201’s but did not do
so without documenting any valid reason.
The South African
Taxation Standard 7000 Knowledge of error: Administrative proceedings
provides guidance for a SAIT tax practitioner who becomes aware of an error in
a return that is the subject of an administrative proceeding. Although this
standard is not relevant to your situation, it provides some useful guidance as
to what steps need be taken by a SAIT tax practitioner when non-compliance
comes to the front. Paragraph 9 – 11 of the said Standard provides the
When the SAIT tax practitioner is engaged to represent the taxpayer in an administrative
proceeding with respect to a return containing an error of which the SAIT tax
practitioner is aware, the SAIT tax practitioner should advise the taxpayer to
disclose the error to SARS. If the SAIT tax practitioner believes that the
taxpayer could be subject to criminal prosecution, the taxpayer should be
advised to seek specialist advice, before taking any action.
It is the taxpayer’s responsibility to decide whether to correct the error. If
the taxpayer does not correct an error, a SAIT tax practitioner should withdraw
from representing the taxpayer in the administrative proceeding and consider
whether to continue a professional or employment relationship with the
A SAIT tax practitioner should consider consulting with his or her own legal
counsel before deciding on recommendations to the taxpayer and whether to
continue a professional or employment relationship with the taxpayer.
potential for breaching client confidentiality or infringing tax law and the
potential adverse impact on a taxpayer of a SAIT tax practitioner’s withdrawal,
as well as other considerations may create a conflict between the SAIT tax
practitioner’s interests and those of the taxpayer.’ It is of utmost
importance to remind a client of his rights and obligations under the different
tax Acts and to document all responses given by the client in, for example, the
working papers and to store all written correspondence in this regard. It is
submitted that if you have done so, that you cannot be held responsible for any
non-compliance on your client’s side. It is further submitted that you need not
inform SARS of the client’s non-compliance.
Whether the firm may
be held liable for the non-compliance may depend on the particulars of the
engagement letter/contract concluded with the client. It is recommended that
you familiarise yourself with the South African Taxation Standards to which can
provide useful guidance in similar circumstances. The South African Taxation
Standards can be found at the following link: http://www.thesait.org.za/?page=SA_tax_standards.
Making sure that all communication of the breach of the tax laws to your client
is documented is of vital importance to protect your firm from any potential
legal claims in this regard.
The decision to continue a professional
relationship with the taxpayer also needs to be considered by your firm in
light of the client's response to you pointing out their errors.