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Can SARS request separate financials for each trade carried on by an individual?

14 April 2015   (0 Comments)
Posted by: Author: SAIT Technical
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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 business.

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 audit.

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 ITR12.

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 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.


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