Can you get VDP relief for one tax year if you’re being audited for another tax year?
26 May 2015
Posted by: Author: SAIT Technical
Author: SAIT Technical
refer to the fact that in terms of the VDP II, any taxpayer who is already
under audit, is excluded from VDP relief.
Is a taxpayer
precluded from relief only for the year under investigation, or for ALL tax
years? My personal experience to date has been that only the year specifically
under audit is precluded, and all other years still qualify. Is this
The SARS VDP
guide states that SARS may permit a person who would otherwise be excluded as a
result of the audit or pending audit rule, to apply for VDP relief where SARS
the default would not otherwise have been detected during the audit or
the application would be in the interest of good management if the tax
system and the best use of SARS resources.
judgment and the application of a person's discretion. How is this judgment
exercised in practice?
I have a client
already selected for audit, and would like to offer them the option of
voluntary disclosure of any defaults they are aware of, if this is in fact
available to them. My experience is you get a different answer from each person
you speak to at the VDP unit.
What should I
do to cover my client (and myself) is these circumstances?
Voluntary disclosure programme in Part B of Chapter 16 of the Tax
Administration Act provides that a person may apply for voluntary disclosure
relief, unless that person is aware of:
pending audit or investigation into the affairs of the person seeking relief;
audit or investigation that has commenced, but has not yet been concluded.
From the facts
we accept that the audit has already commenced. This means that the only option
open to the taxpayer would be to request a senior SARS official to direct that
the person can apply for voluntary disclosure relief, despite the fact that the
audit has already commenced. The senior SARS official would do so if he
or she is of the view, having regard to the circumstances and ambit of the
audit or investigation, that -
'default' in respect of which the person wishes to apply for voluntary
disclosure relief would not otherwise have been detected during the audit or
application would be in the interest of good management of the tax system and
the best use of SARS' resources.
You are correct
that SARS provides no further information with respect to both requirements
mentioned above. It is the view of the senior SARS official that will be
relevant. Whilst it is reasonable to accept that SARS uses guidelines to
assist the senior SARS official in considering such an application, this
information is not available or is not public knowledge.
The following may be relevant to "would not otherwise
have been detected” requirement
The letter of
authority to conduct the audit must indicate the initial basis and scope of the
audit or investigation – see section 48(2). It may be clear from this
letter if the ‘default’ would have been detected during the course of the
audit. It is common for these letters to also indicate the relevant years
of assessments under audit. We submit that if a default was detected in a
year under audit and it is clear that the same default was made in other years,
not included in the initial scope, that the SARS view may well be that it would
have been detected.
If the senior
SARS official is satisfied that SARS would not have unearthed the default, the
person may be allowed to apply provided that this is in the interest of the
good management of the tax system and amounts to the best use of SARS’s
resources. Again SARS does not provide any information to explain this further.
In the paragraph 16.7.1 of the Short guide to the Tax Administration Act it is
stated that "the main purpose of such a framework is to enhance voluntary
compliance in the interest of the good management of the tax system and the
best use of SARS’s resources.”
appears that the first requirement is the important hurdle to cross and that
the second one may be easier. But, as we have already indicated, the only
avenue is for the taxpayer to apply to the senior SARS official.
officials are more than likely not senior SARS officials. As the application is
to be attended to by a senior SARS official, we believe the response should be
relatively consistent. We agree that "this requires judgment and the
application of a person's discretion”, but we don’t know how this judgment is exercised
There are tax
practitioners that specialise in this field and it should be considered to
consult one of 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.