Frozen bank accounts: what Dumakude requires the tax accountant to prove

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Frozen bank accounts: what Dumakude requires the tax accountant to prove

• 27 October 2026
• Tax Dispute Resolution
• Dr Stiaan Klue

Source: Monthly Tax Update, Professor Jackie Arendse, October 2026. Webinar-on-Demand: Monthly SARS Update with Prof Jackie Arendse - October 2026

At a glance

An account freeze often reaches the tax accountant as a cash-flow emergency. The immediate temptation is to explain the incoming payment and demand that the bank release it. Cuba Dumakude v Bidvest Bank Limited and Another shows why that response can be inadequate. The enquiry must distinguish the bank’s contractual power, the South African Revenue Service’s (SARS) collection power and the customer’s evidence of entitlement to the money.

The case does not establish that every recipient of a suspicious payment becomes personally liable for the payer’s tax. Its practical significance is more exacting: a recipient seeking release of traced funds must confront the transaction evidence, while any challenge to collection must engage with the particular statutory power used.

The payment trail mattered more than the account balance

Hill Side Trading and Projects CC received a VAT refund of R3,279,667.63 on 13 February 2025. R900,000 was transferred to the applicant’s Bidvest account four days later. The bank suspended the account in February; SARS issued third-party notices in April. The applicant sought release of the remaining R448,838.35.

The sequence matters. The bank’s initial suspension preceded the tax notices. A challenge aimed only at the later SARS action would therefore not necessarily dispose of the bank’s independent grounds for continuing to restrict the account.

The evidence also went beyond a bare allegation of an irregular refund. Suppliers denied the transactions reflected in invoices, the purported business address raised concerns, and the applicant did not produce the contracts, invoices and delivery records needed to substantiate his claimed entitlement. The court considered the movement and expenditure of the funds in assessing the risk of dissipation and the claimed right to release.

For an accountant, the first useful product is a transaction schedule connecting each receipt to its legal and commercial basis. It should identify the payer, account, date, amount, purpose, supporting agreement, invoice, performance and subsequent movement. Reconstructing this record from contemporaneous documents is materially stronger than obtaining a broad explanation after the freeze.

That discipline also belongs in ordinary refund and supplier controls. A client’s apparently complete invoice pack may still fail if the named supplier denies the transaction or there is no evidence that the goods or services were supplied. Review material inconsistencies before filing or defending the claim, and preserve the original documents and subsequent explanations. The purpose is to establish an accurate record; unresolved differences should be visible to the adviser assessing the matter.

These are review indicators drawn from the case, not presumptions of fraud against a client.

Client conversation trigger: Where a client receives an unusual payment from another business, establish the contractual basis and proof of performance before treating the bank credit as sufficient support for the transaction.

Section 179 is a collection mechanism with conditions

Section 179 of the Tax Administration Act permits SARS to require a person holding or owing money for or to a taxpayer to pay it to SARS in satisfaction of the taxpayer’s tax debt. The provision also regulates inability to comply, liability for paying money contrary to the notice and requests concerning payment arrangements.

Ordinarily, section 179(5) requires a final demand delivered to the tax debtor at least ten business days before the third-party notice, with the information and opportunities specified in that subsection. Section 179(6), however, permits a senior SARS official to dispense with that demand where the official is satisfied that giving it would prejudice collection. In Dumakude, the court accepted the collection-prejudice justification on the evidence before it.

The statutory enquiry should therefore be recorded as a sequence. Identify the tax debtor, the third party addressed, the money said to be held for or owed to the debtor, the debt being collected and the notice’s requirements. Then obtain the final-demand history or the basis for invoking the exception. An unexplained absence of a final demand and an evidenced invocation of section 179(6) are different cases.

The judgment expressly recognised that the underlying tax debt was Hill Side’s, rather than the applicant’s. That distinction prevents a mistaken leap from tracing money into an account to asserting an unrestricted personal tax liability against its holder.

Client conversation trigger: For a client affected by a third-party notice, identify whose tax debt is being collected and in what capacity the client or bank is addressed before drafting the response.

Contractual bank powers need a separate response

The court considered Bidvest’s account terms and the information supporting a reasonable suspicion of fraud. It accepted the bank’s contractual entitlement to suspend the account without prior notice in the circumstances. The applicant’s inability to prove entitlement to the funds was a further obstacle to the relief sought.

These are distinct findings. Invalidating a SARS notice would not, by itself, prove that a bank lacks a contractual basis for a restriction. Conversely, a valid contractual suspension does not answer every question about the legality of a tax collection notice. The accountant should keep separate evidence files for the commercial transaction, the banking restriction and the SARS process, with a single chronology connecting them.

Urgency does not remove the need for proof. A schedule of imminent payroll or supplier obligations may explain hardship, but it does not establish ownership of disputed funds or invalidate the statutory process. Legal proceedings should be informed by both the financial consequences and the available evidence of entitlement. The judgment’s adverse costs outcome reinforces the importance of testing both before litigation.

Client conversation trigger: When a frozen account threatens payroll, prepare the cash-flow evidence and the transaction evidence together; ensure the legal adviser can address each independent basis for the restriction.

Practitioner action checklist

Related reading: Challenging restrictions on tax refunds and bank accounts; Reconciling bank deposits before disputing an assessment; Moving the business does not necessarily leave the tax debt behind.

Official source: SARS: Cuba Dumakude v Bidvest Bank Limited and Another judgment.

Frequently asked questions

Can SARS take money from my bank account without a final demand?

Section 179(5) generally requires a final demand before a third-party notice, but in Dumakude the court upheld the notices because collection prejudice justified dispensing with it. Test the statutory notice and the claimed exception separately.

Does receiving a suspicious payment make me liable for the payer’s tax?

The case does not establish that every recipient of a suspicious payment becomes personally liable. A recipient seeking release of traced funds must, however, confront the transaction evidence.

What evidence is needed to unfreeze a bank account?

A transaction schedule connecting each receipt to its legal and commercial basis: payer, account, date, amount, purpose, agreement, invoice, performance and subsequent movement. The applicant in Dumakude did not establish a clear entitlement to the funds.

Build your expertise: to apply these principles in practice, explore The Tax Faculty’s SARS Dispute Resolution: A Focus on Objections and Appeals webinar on demand.

About the author

Dr Stiaan Klue is Executive Dean and CEO of The Tax Faculty. He was the founding CEO of the South African Institute of Taxation (SAIT) and is the founding author of Silke on Tax Administration (LexisNexis).

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