New tax changes mean new tax schemes
21 September 2015
Posted by: Author: BDO South Africa
Author: BDO South Africa
Consumers and businesses by now have had a few months to assess the impact of tax changes indicated by the Finance Minister in his most recent Budget Speech.
"Be wary though that with these changes also come charlatans who pounce on uninformed business owners and individuals with offers ranging from sophisticated tax avoidance schemes to offers of services or products to ensure compliance," warns BDO Pretoria Consultant and ex-Managing Partner, Roy Edge. "This is nothing new, we see it all the time where individuals or groups lure unsuspecting people into parting with hard-earned money by investing in new and creative tax schemes."
Now together with the new proposals put forward by the Davis Committee, these groups may use this as another opportunity to get people to part with their cash. The turmoil in the world markets recently has also resulted in exacerbated panic by some people.
There have been some well publicised schemes, particularly in the UK and USA which have resulted in many taxpayers burning their fingers.
- The Eclipse film partnership scheme was marketed by a prominent accounting firm to dozens of clients who appeared to be uninformed of potential losses. The Court of Appeal ruled on it being a tax avoidance scheme and in some instances investors have been left with bills surmounting their investment.
- A major accounting firm in the US agreed on a settlement of $123m resulting from it advising, marketing and then trying to defend a scheme for wealthy individuals.
- Recently a film scheme set up by a UK Company is being challenged by the authorities in the tax court. The scheme involves amongst others, a number of English international cricketers, who signed up for the scheme as part of planning for their financial future, and who have received demands for up front repayment of tax while the case was being heard.
It does not only happen in the UK and USA. Australian authorities recently ruled against mass marketed tax schemes, and in South Africa last year, Deputy President, Cyril Ramaphosa, issued a strong warning to those funnelling money out of the country where this constituted tax evasion.
Edge gives the following tips to bear in mind when considering these offers:
- Deal only with a reputable firm or adviser
- Try and establish whether the advice/scheme has been around for some time, tested and passed the credibility test. There are of course many schemes which are legitimate allowing people to minimise their tax within the framework of the law and tax legislation (there is often a fine line between legitimate tax avoidance and tax evasion and this is why you need a reputable adviser).
- Ensure you obtain all the facts relating to it and that you understand it. Many so-called legitimate schemes are couched in lengthy and technical jargon and unsuspecting clients sign to their their ultimate detriment.
This article first appeared on bdo.co.za.