Record keeping - a vital aspect
23 January 2015
Posted by: Author: Waseema Noormahomed
Author: Waseema Noormahomed
Is record keeping your weakness? Have you been in business for a while
but are struggling to keep record of what you are doing? Do you need guidance
on how to keep records of your daily business transactions? Your problems are
one step away from being solved.
We often hear of instances where taxpayers have lost cases against SARS
due to poor record keeping. This happens as a result of the burden of proof
placed upon taxpayers that can only be discharged with proper documentation.
Why is recording keeping necessary to all businesses, regardless of their
- Keeping accurate financial records
is the easiest way to clear up any inconsistencies with SARS.
- SARS wins many disputes because
taxpayers failed to keep sufficient documentation of expenses incurred or
- When an audit case arises, SARS’
first test is to determine whether the taxpayer actually incurred the expenses
claimed in their tax return.
- As stated above, the burden of
proof that shows that an amount is not taxable or that deductions are in fact deductible
rests on the taxpayer. If documents are not retained, taxpayers have a hopeless
It is important that one makes a habit of recording all business transactions.
According to tax law, you are required to keep records for five years from
the date of submission of your tax return.
In cases where objections and appeals have been lodged against assessments,
it would be advisable to keep all records and data relating to the assessments
under objection or appeal until such time that the objection or appeal has been
finalised, even if the timeframe for finalisation exceeds seven years. Records,
books of account, and documents, must be kept or retained in their original
form within the specified timeframe and in a safe place.
Duty to keep records
A person must keep the records, books of account or
- Enable the person to observe the
requirements of a tax Act;
- Are specifically required under a
tax Act or by the Commissioner by public notice; and
- Enable SARS to be satisfied that
the person has observed these requirements.
The requirements to keep records, books of account or documents for a
tax period apply to a business that has submitted a return for the tax period;
or is required to submit a return for the tax period and has not submitted a
return for the tax period. Additionally, a business that is not required to
submit a return but has, during the tax period, received income through sales
and engaged in any other kind of activity that is subject to tax.
It is advisable that business owners keep separate private and personal
accounts in order to avoid private and business expenses being confused. Gross
receipts refer to the income generated from the business. Documents to
substantiate such receipts should include cash receipts, bank deposit slips,
receipts books, invoices, credit card receipts. Purchases are the items you buy
and resell to customers. Documents kept should show the amount paid for the
goods, including the VAT amount paid, in order to ensure that you can claim
back the VAT on purchases.
A few records of items that should be kept include:
- Records showing the assets,
liabilities, undrawn profits, revaluation of fixed assets and various loans;
- Fixed assets register;
- Detailed daily records of cash
receipts and payments reflecting the nature of the transactions and the names
of the parties to the transactions;
- Detailed records of credit
purchases (goods and services) and sales reflecting the nature of the
transactions and the names of the parties to the transactions;
- Statements of annual stocktaking;
- Supporting vouchers.
If there is any difficulty in keeping records one should consult your
SAIT-registered tax advisor for more information.
This is just a simple overview of record keeping. However, whatever the
nature of your business, remember, good record keeping is vital for its
survival, as a lack of records could definitely lead to trouble from SARS.
Furthermore, failure to keep adequate records may lead to a fine or even imprisonment.