FAQ - 28 September 2016
29 September 2016
Posted by: Author: SAIT Technical
Author: SAIT Technical
1. Whose details should be completed on the IT12T for distributions to a minor?
Q: On the income tax return for a trust (e-filing) there is a section where the particulars of the person should be filled in who received a distribution from the trust – if the person who received the distribution is under-aged the parent is taxed on the child’s behalf. Should the particulars of the parent or the child be filled in on that section of the trust return? The child won’t have an Income Tax number.
A: It is not in all instances where an amount vested in a child is deemed to be that of the parent of the child. The interpretation of the law in this regard was stated by Judge Froneman in CSARS v RM Woulidge as follows:
“For its application section 7(3) requires a disposition made wholly or to an appreciable extent gratuitously out of liberality or generosity…”
and that must have been made by the parent of the child.
If the child doesn’t have a tax reference number we understand the return can still be submitted, but that is not your problem.
From the ITR12T it is clear that the return requires information of the amounts not taxed in the trust, but taxed in the hands of the beneficiaries or donor. On the relevant page the return refers to “person/beneficiary” but it, or the guide, doesn’t clarify what is required to be disclosed here. In other words, must one show the details of the beneficiary who received the amount and the details of the person to be taxed on the amounts or just the last mentioned.
At the bottom of the page the return refers to ‘details of transactions’ and it then refers to “Was taxable on amounts distributed to / vested in beneficiaries or taxable i.t.o s7 or par. 68 – 72 of the Eighth schedule”. From this (the use of the words ‘was taxable’) it appears that it is the detail of the parent that is required here as the child would not be taxable.
2. Can I object to an invalid objection?
Q: Our client received an additional Income tax assessment. I objected to this additional assessment but the objection was submitted after 30 days, since my client and I were not aware of the additional assessment issued by SARS. SARS replied and stated it is an invalid objection since the reason for late submission is not exceptional. The problem is my client was not aware of the additional assessment and we submitted the objection as soon as our client became aware of the additional assessment. How can an objection be submitted if no one was aware of the assessment? Kindly advise if I should submit another objection to the invalid objection notification?
A: We accept that the objection was lodged after 51 days. The Act requires, where the objection is so lodged, that it must be due to exceptional circumstances. The current practice generally prevailing is that, “although not directly relevant to section 104(5), section 218 nevertheless provides an indication of the type of things which, taking into account the particular facts and circumstances, may constitute exceptional circumstances for purposes of section 104(5). For example, exceptional circumstances may include –
• a natural or human-made disaster;
• a civil disturbance or disruption in services;
• a serious illness or accident; and
• serious emotional or mental distress.
The mere existence of one of these factors is not sufficient. The taxpayer would need to demonstrate that the factor was the reason for the delay.”
If SARS didn’t accept the reasons provided, this in itself, constitutes a decision by SARS and can be objected to.
The problem is that the tax court recently agreed with SARS. The following was said by Judge Satchwell:
“The lapse of time from mid December 2014 to June 2015 is not satisfactorily explained – let alone sufficiently to discharge the onus of proving ‘exceptional circumstances’.”
The fact that the taxpayer was unaware of the assessment may well not be seen by SARS (or the court) as ‘exceptional circumstances’.
We don’t know what the grounds for the additional assessment is, but it appears that a reduced assessment may be required. Another option would then be to request SARS to issue one in terms of section 93(1)(d) of the Tax Administration Act.
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.