Can a payroll provider withhold IRP5's for employees of a taxpayer?
Important:
This answer is based on tax law for the tax year ending 28 February 2017.
Answer:
We agree with you that this, in principle, may be the same as where a tax practitioner refuses to hand over client’s documents to another practitioner or to release an efiling profile. The principle is, if there is no legal right to withhold the client’s documentation, the practitioner (‘payroll provider’ in this instance) should hand them over to the client (employer). Other than the above, it is really a legal issue of whether or not the ‘payroll provider’ has a valid lien over the documents in question.
In terms of paragraph 13(1) of the Fourth Schedule to the Income Tax Act, it is the employer who must deliver the employees’ tax certificates to the employees. We are not sure, and it may again be a legal issue, whether this obligation can be delegated to the ‘payroll provider’. In other words, whether the ‘payroll provider’ will have to provide the IRP5’s even where the fees for producing them were not paid.