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Record keeping - a vital aspect

Friday, 23 January 2015   (0 Comments)
Posted by: Author: Waseema Noormahomed
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Author: Waseema Noormahomed (SAIT)

Is record keeping your weakness? Have you been in business for a while but are struggling to keep record of what you are doing? Do you need guidance on how to keep records of your daily business transactions? Your problems are one step away from being solved.

We often hear of instances where taxpayers have lost cases against SARS due to poor record keeping. This happens as a result of the burden of proof placed upon taxpayers that can only be discharged with proper documentation.

Why is recording keeping necessary to all businesses, regardless of their size?

  • Keeping accurate financial records is the easiest way to clear up any inconsistencies with SARS.
  • SARS wins many disputes because taxpayers failed to keep sufficient documentation of expenses incurred or income received.
  • When an audit case arises, SARS’ first test is to determine whether the taxpayer actually incurred the expenses claimed in their tax return.
  • As stated above, the burden of proof that shows that an amount is not taxable or that deductions are in fact deductible rests on the taxpayer. If documents are not retained, taxpayers have a hopeless case.  

It is important that one makes a habit of recording all business transactions. According to tax law, you are required to keep records for five years from the date of submission of your tax return

In cases where objections and appeals have been lodged against assessments, it would be advisable to keep all records and data relating to the assessments under objection or appeal until such time that the objection or appeal has been finalised, even if the timeframe for finalisation exceeds seven years. Records, books of account, and documents, must be kept or retained in their original form within the specified timeframe and in a safe place.

Duty to keep records

A person must keep the records, books of account or documents that:

  • Enable the person to observe the requirements of a tax Act;
  • Are specifically required under a tax Act or by the Commissioner by public notice; and
  • Enable SARS to be satisfied that the person has observed these requirements.

The requirements to keep records, books of account or documents for a tax period apply to a business that has submitted a return for the tax period; or is required to submit a return for the tax period and has not submitted a return for the tax period. Additionally, a business that is not required to submit a return but has, during the tax period, received income through sales and engaged in any other kind of activity that is subject to tax.

It is advisable that business owners keep separate private and personal accounts in order to avoid private and business expenses being confused. Gross receipts refer to the income generated from the business. Documents to substantiate such receipts should include cash receipts, bank deposit slips, receipts books, invoices, credit card receipts. Purchases are the items you buy and resell to customers. Documents kept should show the amount paid for the goods, including the VAT amount paid, in order to ensure that you can claim back the VAT on purchases.

A few records of items that should be kept include:

  • Records showing the assets, liabilities, undrawn profits, revaluation of fixed assets and various loans; 
  • Fixed assets register;
  • Detailed daily records of cash receipts and payments reflecting the nature of the transactions and the names of the parties to the transactions;
  • Detailed records of credit purchases (goods and services) and sales reflecting the nature of the transactions and the names of the parties to the transactions;
  • Statements of annual stocktaking; and
  • Supporting vouchers.

If there is any difficulty in keeping records one should consult your SAIT-registered tax advisor for more information.

This is just a simple overview of record keeping. However, whatever the nature of your business, remember, good record keeping is vital for its survival, as a lack of records could definitely lead to trouble from SARS. Furthermore, failure to keep adequate records may lead to a fine or even imprisonment.  



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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