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FAQ – 22 July 2014

Tuesday, 22 July 2014   (0 Comments)
Posted by: Author: SAIT Technical
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Author: SAIT Technical

1. Remedies where PAYE was not withheld from payments made to personal service providers

Q: After attending a recent seminar I realised that one of my clients was acting as a Personal Service Provider but no PAYE was being deducted from its fees. In this instance it is a company with two directors and shareholders and one director is rendering the service wholly in the office of another company where 80% of the fees are generated. I informed my client of my views and they said that this would soon change as the other director will start to contribute fees as well. I am not sure how to act in the interim.

A: We have assumed that in your determination of the client as personal service provider you have determined that the director earning the 80% or more fees on behalf of the company is also a connected person to the company. Where payment for services is made to a personal service provider and PAYE withholding applies to payments made to such client, then para 5(1) Fourth Schedule to the Income Tax Act imposes an obligation on the employer’s (i.e. the person who should have withheld PAYE)  to pay the PAYE over to SARS. Such liability will in terms of para 5(1A) only be deemed to have been discharged on payment to SARS.

In the current facts it may be advisable that the "employer” submit a voluntary disclosure in terms of s225 -233 of the Tax Administration Act. It would also be advisable that the employer apply in such disclosure to SARS in terms of para 5(2) Fourth Sch that the "employer” be absolved from the obligation as SARS (as inferred from the facts provided) will have a reasonable prospect of ultimately recovering the amount from the client which is still trading.

If SARS does not approve such application for relief then the "employer” will be liable for the tax but will have a corresponding right in terms of para 5(3) Fourth Sch to recover the amount of PAYE paid to SARS from the client. In respect of any interest and late payment penalties that the "employer” is not absolved of in terms of s229 Tax Administration Act, no recover would be possible unless the employer can show that it did not withhold due to any actions of the client, whereupon it would have to seek legal advice on any damages claim it may institute against the client.  

2. Burden of proof for travel expenses incurred by a commission earner

Q: A more than 50% commission earner has a logbook for all his business travels. He however does not have record of actual expenditure such as petrol slips. From what I have heard, he may use the AA tables to arrive at a deemed value per business kilometre travelled and SARS is fine with this? 

A: Historically SARS would as practice per Practice Note 24, allow self-employed taxpayers to claim travel expenses based on the deemed kilometre cost method as available to travel allowance recipients. However, since 1 Mar 2010 SARS has withdrawn this PN on the basis that taxpayers are expected to keep better records.

Where a taxpayer intends to claim travel costs but not in terms of the provisions of s8(1)(b) Income Tax Act but rather s11(a) as would be the case if claiming against commission income, it is our view that SARS would still require sufficient documentary evidence (i.e. petrol slips) of the amount incurred. The taxpayer would therefore not be able to use the deemed cost of such expense but rather the actual cost, on which he bears the onus in terms of section 102 Tax Administration Act.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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