In 2007/2008 the UIF contribution limit was increased. However, the company’s payroll implemented the change from October 2007. It was then communicated that this limit increase was only effective from February 2008 and thus illegal to do so earlier. Ther
Author: The Payroll Authors Groups of South Africa
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
SARS sent a notification to employers during September 2007 advising employers of the increase UIF contribution limit of R12478 per month (from R11 662 per month prior to this increase) being effective 1 October 2007 – this was per the notice issued by the Minister of Labour on 23/08/2007. Due to a communication error, the actual increase was only legislated by the Minister of Finance with effect of 1 February 2008 (Gazetted on 31/01/2008). This notice was required in terms of the Unemployment Insurance Contributions (UIC) Act before it become legally required for employers to change their monthly contribution to the UIF Fund. Due to the absence of this legal notice (in terms of the UIC Act), the result was that employers were not legally required to increase their UIF contributions to accord with the maximum income amount of R12 478 per month set by the Minister of Labour. Any increased payments made on this basis (from 01/10/2007 to 31/01/2008) constituted overpayments, entitling employers to claim refunds from SARS for the difference exceeding the legal maximum limit of R11 662 per month. The SARS guide on UIF also make it clear that the increase limit is only applicable for contribution purposes with effect from 1/2/2008 . As concluded from the information in this query, the increased UIF limit was applied in the payroll with effect from October 2007 and declared via EMP201 to SARS. This means that an over-deduction of UIF has been applied in the payroll for the periods October 2007 to January 2008. When the employer completed the annual EMP501 reconciliation, the monthly liabilities should have been corrected to exclude the increased UIF limit for these relevant months, which would have resulted in an over-deduction on the SARS account of the employer (credit). The following should be done to correct this: 1. If this was not done, the employer need to correct these immediately by — a. resubmitting an revised EMP501 reconciliation and correct the UIF liability amounts for the periods 200710 – 200801 b. correct the tax certificates to reflect the actual UIF according to the UIF threshold before the increase in 1/2/2008. 2. This over-deduction should then be allocated (via journal) to the period 03/2008 where the employer has under paid the UIF due to the credit (resulting in the over-deduction of UIF in the 200710 – 200801 months.
If the above was done as mentioned in 1 above, the employer needs to send an email to the SARS “contact us” e-mail address and request the covid relief to be reinstated, due to the fact that the credit is available to be offset against the underpayment of UIF of 200803. This email must also include the request to transfer the credit (2 above) from the 200710-200801 periods to the 200803 period. SARS can only do journals if the liability amount in the relevant months are corrected. If this is not corrected, then there will be no credit available on these months. SARS cannot do journals as the liability (debit raised in the relevant periods) must be adjusted to reflect the correct liability. Due to the fact that SARS require a valid declaration to adjust liabilities, the employer need to resubmit a revised EMP501 with the supporting tax certificates to adjust the liabilities for these months. Only after liabilities where adjusted, a credit will be available on these period (as a result of the over-deduction of UIF) which can then be requested to allocated to the period in debit (200803). This request will then allow SARS to do the necessary journals to transfer the credit from the effected months to 200803. Currently there is no credit on the account due to the fact that the liabilities on the account is not corrected, therefore, no journal can be done unless there is an available credit.