Choose tax advisers wisely
13 August 2015
Posted by: Author: Andrew Wellsted
Author: Andrew Wellsted
Since SA’s reintroduction into the global economy, the tax codes have become increasingly complex. It is becoming ever more difficult for taxpayers to keep abreast of updates to the rules, understand the concepts behind their formulation, and comply with their reporting and other obligations. It is thus important for taxpayers to know when obtaining external advice is appropriate, who to talk to, and what mechanisms are available to ensure tax compliance.
Run-of-the-mill tax reporting can still be done by most taxpayers themselves, unless the circumstances are complex or the numbers large. However, any complicating factors, such as owning offshore assets, or the existence of estate planning structures such as trusts, can significantly complicate tax reporting. It is these more sophisticated arrangements that usually require external input to ensure that large or complex transactions are not embarked on without the fiscal implications being fully understood.
Obtaining advice can be costly, so consideration needs to be given to who to talk to. There are a number of consultancies, including audit firms and bookkeepers, to assist taxpayers in complying and making sure that their reporting is accurate.
Be wary of consultants who are seeking engagements on a contingency basis or on a basis that appears unusual. These types of fee arrangements can be appropriate at times, but advisers should not be improperly incentivised to generate undue tax savings.
Preferably use a registered tax practitioner and ask for the practitioner’s registration number, as well as for the details of which body the practitioner is affiliated to. As the matter gets more complex it may become appropriate to engage more specialised professionals (such as legal advisers with niche experience), notwithstanding that the fees are higher. The cost of not complying can be more onerous than ensuring that the correct advice is obtained upfront.
Generally, ask for all advice in writing. The first important benefit of a written legal opinion is to demonstrate to a regulator that any issues regarding the tax implications of the circumstances were properly ventilated, and that due care was taken to comply with the law. This will have an impact on one’s culpability if the regulator decides that any law was not complied with. Under the new tax rules, where a taxpayer has obtained legal opinion from a registered tax practitioner the extent to which understatement penalties can be levied can be limited. A written legal opinion has thus taken on a new significance.
Bear in mind the issues of confidentiality or legal privilege. In circumstances where the advice is uncertain and may be disputed in future, approach an attorney to ensure that the advice received enjoys the protection of these doctrines.
Where the matter is difficult to determine with finality, or where the law may be unclear, consultants will often approach senior advocates, as their litigation expertise and experience is useful in determining and predicting the outcome of any legal challenge that may arise.
Finally, the SA Revenue Service can be approached for a ruling request if absolute certainty is required for a particular transaction, or regarding the interpretation of a provision. Again, it is highly advisable for legal specialists to be sought to prepare the application.
• Andrew Wellsted is head of tax at Norton Rose Fulbright
This article first appeared on financialmail.co.za.