A company’s annual financial statements (AFS) was captured and drafted around August/September 2020 (when payment was made in full). The taxpayer signed the AFS for 2020 and now tax is due for this year. The taxpayer is about to submit the ITR14 tax retur
Author: Peter Surtees
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
Every company is by definition a provisional taxpayer. Relevant tax law The definition of “provisional taxpayer” in paragraph 1 of the Fourth Schedule provides that: “provisional taxpayer" means- …(b) any company. There are exceptions but your client doesn’t appear to fall within any of these exceptions. 1. Your client will be liable for: understatement penalties under section 223 of the Tax Administration Act; non-compliance penalties under sections 210 and 211 of the TAA; and interest on the underpayments under section 89quat of the Income Tax Act. 2. If you file and pay the provisional tax returns and amounts due now, you will reduce the interest due. This will not avoid or reduce the understatement penalties, but the non-compliance penalties will be limited. If you look at the table in section 211 you will see why. 3. I think I’ve answered this question in 1 and 2. In short, the sooner you file the provisional tax returns and pay the amounts due, the better for your client.