Print Page   |   Report Abuse
News & Press: Technical & tax law questions

Is a tax practitioner compelled to inform SARS of tax evasion by a client?

13 November 2014   (0 Comments)
Posted by: Author: SAIT Technical
Share |

Author: SAIT Technical

Q: A client sold his business as a going concern from his close corporation (CC), causing a capital gain. The member then withdrew all funds out of the CC in anticipation of deregistration. The tax returns have never been submitted by me/the firm to SARS since the member has not signed the financial statements. Without consulting me and without my knowledge the member voluntary liquidated the CC. To my knowledge neither the member nor the attorney took any action to inform SARS of the tax owed before liquidation leaving SARS no recoverability options before the liquidation was granted by the court. I am concerned that I have a responsibility as tax practitioner to report this matter to SARS or face negative consequences as well should SARS not be informed.

A: Paragraph .06 of South African Taxation Standard 6000: Knowledge of Error: Tax Return Preparation states the following with regards to your obligation in this specific situation:

‘A SAIT tax practitioner should inform the taxpayer promptly upon becoming aware of an error in a previously submitted return or upon becoming aware of a taxpayer’s failure to submit a required return. A SAIT tax practitioner should recommend the corrective measures to be taken. The SAIT tax practitioner is not obliged to inform SARS, and a SAIT tax practitioner may not do so without the taxpayer’s permission, except when required by law.’

We are not aware of any law that would require you to disclose this type of non-compliance and it is strongly advised that you contact the public officer of the CC to inform him/her of the consequences of non-declaration of the gain through not submitting a return. You are correct in stating that you should consider whether continuing a professional relationship with the client should the client refuse to correct the non-compliance.

We would like to draw your attention to sec 155 of the Tax Administration Act (No. 28 of 2011) (hereinafter ‘TAA’) which may hold the public officer of the company liable for the tax debt (in our opinion SARS has reasonable grounds to invoke this provision). Furthermore, sec 180 and 183 would entitle SARS to recover the tax debt from the financial manager or person assisting with the dissipation of assets respectively.

There would also be criminal offences in terms of sec 234(d) and (o) of the TAA.

Disclaimer: Nothing in this query and answer should be construed as constituting tax advice or a tax opinion. An expert should be consulted for advice based on the facts and circumstances of each transaction/case. Even though great care has been taken to ensure the accuracy of the answer, SAIT do not accept any responsibility for consequences of decisions taken based on this query and answer. It remains your own responsibility to consult the relevant primary resources when taking a decision.


WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

MINIMUM REQUIREMENTS TO REGISTER

The Act requires that a minimum academic and practical requirments be set to register with a controlling body. Click here for the minimum requirements of SAIT.

Membership Management Software Powered by YourMembership  ::  Legal