How do you correct an error in a return which was submitted more than 3 years ago?
15 April 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
Q: How does one correct
old returns where the taxpayer made an error when submitting a tax return. When
doing a correction on efiling it says it is too old you must do an objection to
the original assessment. I have done that and it is automatically disallowed as
it is older than 3 years. So how can the taxpayer amend their previous returns?
A: Section 98 of
Tax Administration Act (the TAA) may be applicable to your client.
Specifically sec 98(1)(d) read with sec 98(2) and sec
99(2)(d)(iii) of the TAA. Although it is submitted that the scope of sec
98(1)(d) is really narrow, it may be worth a try.
Sec 98 of the TAA states the following
‘98. Withdrawal of
assessments.—(1) SARS may, despite the
fact that no objection has been lodged or appeal noted, withdraw an assessment—
(d) in respect of which the Commissioner is satisfied that—
(i) it was based
undisputed factual error by the taxpayer in a return;
(ii) it imposes
an unintended tax debt in respect of an amount that the taxpayer should not
have been taxed on;
recovery of the tax debt under the assessment would produce an anomalous or
(iv) there is no
other remedy available to the taxpayer; and
(v) it is in the
interest of the good management of the tax system.
(2) An assessment
withdrawn under this section is regarded not to have been issued, unless a
senior SARS official agrees in writing with the taxpayer as to the amount of
tax properly chargeable for the relevant tax period and accordingly issues a
revised original, additional or reduced assessment, as the case may be, which
assessment is not subject to objection or appeal.’
Sec 99(2)(d) of the TAA further determines that sec 99(1)
does not apply to the extent that it is ‘... necessary to give effect to ... an
assessment referred to in section 98(2). This would allow SARS to issue a
reduced assessment for the taxpayer despite the fact that the three years have
passed (see sec 99(1)(a) of the TAA).
The Memorandum of the Object of the Tax Administration Laws
Amendment Bill, 2013 stated the following with regards to the amendment to sec
‘In practice, erroneous assessments are often only
discovered after all prescription periods and remedies have expired and it
becomes apparent that it would be unreasonable and inequitable to recover the
tax due under such assessments. Examples are assessments that result from fraud
by a person not authorised by the taxpayer to complete or submit a return, an
undisputed error by the taxpayer in a return or a processing error by SARS in
making the assessment ...’
Sec 98(1)(d)(i)(aa) of the TAA requires that there must be
an ‘undisputed factual error’ in order for the assessment to be withdrawn.
SARS’ interpretation of an ‘undisputed factual error’ is that one should not
encounter any interpretation problems when applying the law to the facts.
Sec 98(1)(d)(iv) requires that no other remedy must be
available to the taxpayer. Due to fact that three years have already lapsed
since the date of assessment, your client has no further right to force SARS to
consider its objection. It can thus be argued that no other remedy will be available
and this requirement may therefore be met.
Given the fact that the three years have lapsed since the
date of assessment sec 98(1)(d) of the TAA may be your client’s last remedy. In
terms of sec 98(1)(d), the ‘Commissioner’ must be satisfied that the
requirements are met. Furthermore, the Memorandum of the Object of the Tax
Administration Laws Amendment Bill, 2013 reiterates the fact that sec 98 of the
TAA will only be applied in narrow circumstances. One can therefore expect that
a strict approach would be followed for the authorisation of an application for
sec 98(1)(d). It is difficult to express an opinion as to whether your
application in terms of sec 98(1)(d) will succeed, but it is worth a try.
You can write a letter to SARS, and ask them to first
withdraw the current assessment. In the letter, cite your client’s
circumstances and how they meet the section 98 requirements. Then email it to
the pcc SARS email address for your region. Secondly, you can ask them to issue
a revised original assessment as mentioned in sec 98(2) 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.