Scenario: A company’s prior year records were finalised and now they realise that entertainment/business expense may not be claimed as business expenses as they don't meet requirements. The expenses then goes to the director/shareholders loan account and
Author: Beatrie Gouws
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
The information that you provided makes it clear that the individuals are employed by the company. Furthermore, that they incurred expenses which they incorrectly attributed to the company in a prior ta year. The company will have to correct the matter in that tax year of assessment. Similarly, if any employees’ tax liability arose in a prior year of assessment, it should be addressed in that year of assessment. That means if the individuals owe the employer, then at that point the no interest loan and the fringe benefit would have accrued, with the accompanying employees’ tax liability. Any offset or other transactions at this point would be after the fact and would not address the fact that the fringe benefit accrued or that the individuals did not incur the expense on behalf of the company for business purposes.