Can SARS request separate financials for each trade carried on by an individual?
14 April 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: I have received
a further request for supporting information from SARS.
They are now requesting that the client present separate
financial statements one for his property portfolio and one for his taxi
The client is operating as a sole trader and therefore there
is no separation between his sources of income.
There are also no requirement that regulates the format of his financial
statements, in fact as far as I am aware he is not required to have financial
statements as a sole trader.
Are these requirements from SARS legitimate?
A: SARS have
requested "relevant material” in terms of section 46 of the TAA. ‘Relevant
material’ is defined in section 1 of the said Act as "any information, document
or thing that is foreseeably relevant for the administration of a tax Act as
referred to in section 3”
I’d say financial statements qualify as such, even though
the sole trader is not required to have them (for non-tax purposes). It seems
they’re looking for an ordinary income statement and balance sheet. If there is
a line of separation between the income and associated expenses of each trade
(i.e. taxi business and property rentals), this will make it easier for them to
Remember that where a taxpayer conducts a trade other than
employment, he/she will usually disclose the income and associated expenses
under the "LOCAL BUSINESS, TRADE AND PROFESSION” section of the ITR12.
If the taxpayer conducts more than 1 trade, the requirement
is that he or she will must separately disclose the income and associated
expenses of each trade separately.
This makes it easier for SARS to audit. The requirement for
financial statements allows them to see the basis for the disclosure in the
I would recommend that you draw up a simple income statement
and balance sheet for each of those trades and send it through to them.
Disclaimer: Nothing in this query and answer should be construed as
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advice based on the facts and circumstances of each transaction/case. Even
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