In layman's terms: what is the tax implications when a private company wants to change its financial year end from 01 Mar-28Feb to 01 Oct-30 Sept and is this change allowed by SARS? The company proposes the change to bring it in line with its other 'subsi
Important:
This answer is based on tax law for the year ending 28 February 2020.
Answer:
There are no ‘tax implications’ if a company changes its financial year. It impacts on the returns, IT14 and IRP6.
The current practice generally prevailing in this regard reads as follows:
The discretionary power of the Commissioner under the definition of “financial year” is not subject to the Companies Act. The Commissioner is, therefore, not bound to accept a notice of change in financial year filed under the Companies Act. If the Commissioner does not agree to the change in financial year end for a specific year of assessment, a company may draw up separate sets of financial statements for that period, one for Income Tax purposes and one for Companies Act purposes. Non-approval can happen, for example, if an application carries negative consequences for the fiscus, such as a decrease in tax rates or enhanced capital allowances. The Commissioner will approve such an application only in exceptional circumstances or may approve it subject to the change taking effect in the following fiscal year.
In other words, it agrees with your view.