Resolving issues with tax assessments

Resolving issues with tax assessments

• 10 May 2022
• Tax Administration
• Nico Theron

Tax assessments are often the cause of some form of issue with SARS. These assessments oftentimes either indicate the taxpayer is paying too little tax or too much tax or that a taxpayer is required to pay a penalty or even that the tax payable is correct, but the taxpayer can’t afford to settle same.

The Tax Administration Act, 28 of 2011 (“the TAA”) provides solutions/possible solutions to all these issues. Take for example a scenario where the assessment reflects too much tax payable compared to what should properly be payable. The TAA provides at least two possible solutions to this problem - the taxpayer can follow the objection process or simply request a reduced assessment outside the process of objection and appeal. Which solution to use though, often depends on the cause of the incorrect assessment, i.e., whether the cause is an error by the taxpayer itself in the tax return or something else.

The same holds true for assessments reflecting too little tax payable compared to what is properly payable. Apart from the underpayment of taxes, these situations often also carry the further risk of SARS imposing penalties and even potential for criminal prosecution. The TAA, in certain circumstances, allows qualifying taxpayers who made an error in their returns, resulting in too little tax being assessed, to remedy the situation without facing penalties and criminal prosecution through something called the “Voluntary Disclosure Program” (“VDP”). Further still, even if that process is not available, for whatever reason, taxpayers can still launch a challenge against any underlying penalties through the remission and objection process once an incorrect assessment has been fixed.

Sometimes though, the assessment is 100% correct but the taxpayer can’t afford to settle the entire tax bill reflected therein. Here too, the TAA provides a possible solution. Taxpayers in this situation can consider applying for payment terms (i.e., to settle the tax bill in installments over time) or in some cases, applying for SARS to permanently write off the tax bill or a portion thereof – commonly referred to as a “compromise”.

All of these solutions though, like most things in tax law, have rules which both the taxpayer and SARS must abide by. Think of them as the “T’s and C’s” of these solutions. If, for example, the taxpayer wants to object to an assessment or request a reduced assessment, there are “T’s and C’s” which must be complied with before the taxpayer can rely on that remedy offered under the TAA. The same applies to remissions, payment arrangements, compromises, etc. These include various things such as abiding to time periods, using the correct forms, setting out the law on which reliance is placed, sending the form to the correct address, making an application for VDP relief voluntarily, and setting out the defaults fully and complete in all material respects to mention but a few.

Failing to comply with these “T’s and C’s” is likely to make these solutions unavailable to the taxpayer.

Nico Theron, is currently hosting a four-part Tax Administration webinar series. In particular, the series covers:

• How to make corrections to returns (both in favour of SARS and taxpayers)
• The imposition and remittance of penalties;
• How to draft an objection; and
• How to apply for payment arrangements and debt compromises.

Click here to read more.

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