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FAQ - 7 October 2015

07 October 2015   (2 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. PAYE deducted but not paid to SARS – who is liable?

Q. How does SARS treat tax credits if the employer has deducted PAYE from an employee but has failed to pay it over to SARS?  Who is liable for this type of non-compliance?

A: There are a number of provisions which pertain to the matter of employer/employee liability regarding PAYE:

Para 4 of the 4th Schedule to the Income Tax Act states:

"Any amount required to be deducted or withheld in terms of paragraph 2 shall be a debt due to the State and the employer concerned shall save as otherwise provided be absolutely liable for the due payment thereof to the Commissioner.” (own emphasis)

Furthermore, para 5(1A) states:

"The liability of the employer as contemplated in paragraph 2 must be deemed to have been discharged if the employer made payment of the outstanding employees’ tax”

The implication from this provision is that the employer is liable for the PAYE.

This must be viewed together with para 5(2), which states: 

"Where the employer has failed to deduct or withhold employees’ tax in terms of paragraph 2 and the Commissioner is satisfied that the failure was not due to an intent to postpone payment of the tax or to evade the employer’s obligations under this Schedule, the Commissioner may, if he is satisfied that there is a reasonable prospect of ultimately recovering the tax from the employee, absolve the employer from his liability under sub-paragraph (1) of this paragraph.”

Therefore, if the employer never deducted the amount, SARS can come after the employee. 

Para 28(3) additionally provides that:

"If the Commissioner is satisfied that the amount or any portion of the amount of employees’ tax shown in any employees’ tax certificate has not been deducted or withheld by the … the employer and the employee shall be jointly and severally liable to pay to the Commissioner the amount which should not have been so applied and such amount shall be recoverable under this Act as if it were a tax.”

Once again, SARS can only pursue the employee if the employer never made the deduction. This doesn’t refer to where the employer withheld the PAYE but never paid it over to SARS. 

2. What is a taxpayer’s right in terms of retaining information for more than 5 years?

Q: We received a mail from SARS this morning.  It’s the first notice that was given with regards to outstanding debt.  It dates back 8 – 14 years.  

What are the taxpayer’s rights?  It is much longer than the five years/seven years that the Income Tax Act/Companies Act prescribes to retain documents. 

A: To verify the amount of tax SARS alleges your client owes, you’ll obviously need information such as statements of account, tax returns, assessments, etc. Alleged tax debts must be traced back to an assessment (see s170 of the TAA). Proof of the assessments ought to therefore be provided by SARS.

Even though you may have disposed of those records, SARS may have all of this information. You can request it from them in terms of the Promotion of Access to Information Act, 2000 (commonly referred to as PAIA).

Both private and public bodies have a duty to provide the access to the requested records, unless specifically refused in terms of PAIA. This means that any record held by the State or the private sector may be accessed upon request, which includes SARS records. SARS has a PAIA manual that deals with the practical implementation of their obligations to taxpayers in this regard. The following extract appears under point number 8 of their manual:

"Taxpayers may obtain personal information about themselves such as a copy of their own tax return, assessment, statement of account and similar records, including records submitted to SARS by the taxpayer or on the taxpayer’s behalf. SARS will provide such information on request to the office where the records are held. A fee may be charged for copying of records depending on the volume requested.”

The Manual On The Promotion Of Access To Information Act, 2000 (especially from point 9 onwards) will provide you with the necessary guidance on how to obtain these records from SARS. 

You may want to communicate the abovementioned to the SARS official in order to get time to sort this all out. I would also ask the SARS official in terms of what provision they are intending to institute legal action against the taxpayer, given the fact that no notice was received of this tax debt (assuming this was the case).

Disclaimer: Nothing in these queries and answers 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 answers, SAIT do not accept any responsibility for consequences of decisions taken based on these queries and answers. It remains your own responsibility to consult the relevant primary resources when taking a decision. 




Comments...

Chris van Coller says...
Posted 20 October 2015
julle antwoord nie die vraag van 8 tot 14 jaar nie
Daniel P. Foster says...
Posted 08 October 2015
In response to Q1 above, an important provision to protect the employee is contained in para 28(2) of the Fourth Schedule. An IRP5 showing PAYE credits shall be prima facie evidence that such tax has been deducted. If the PAYE is showing on the IRP5, it is irrelevant whether or not the employer actually paid it over to SARS - the employee is entitled to a credit. SARS sometimes decline to grant the credit if the employer has failed to pay the PAYE over, and in such instances the taxpayer should object in terms of para. 28(2).

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