With the corporate tax collection deficit announced in September 2023, SARS is dead set on filling at least this fiscal pothole. How will they do this you may ask; well, amongst other avenues, SARS are exploiting the Tax Administration Act, which provides for instances in which the representative taxpayer, employer, or vendor, will be held personally liable for a company’s tax debt!

Excerpts from the Notice of Personal Liability issued by SARS

Unlike the pre-COVID error, these representatives must err of the side of caution, as SARS has rapidly upskilled its Debt Management Team for swift and potentially fatal collections, to your bank account at least.

Mismanagement Burden to be Discharged

Although aggressive with their collections, SARS does, in the Notice of Personal Liability, afford the implicated individual an opportunity to contest their personal liability. This is however not the fire escape it may sound like as proving no personal liability entails what could be construed as an admission on why the taxes were not paid, and what better use were the funds put to.

In discharging the burden of personal liability, certified bank statements must be submitted to SARS, across all accounts, which could include those of the representative taxpayer themselves. In conjunction with this, the last 5 years’ worth of Annual Financial Statements and Management Accounts must be submitted to SARS, confirming there was no mismanagement of funds, or improper performance of financial duties!

This is however not the end of the Tax Debt road, as representative taxpayers have only 10 business days from receipt of the Notice, to put everything together and get it in to SARS. The Notice’s dual purpose, is to also act as a Notice of Final Demand, meaning any shortcoming or failure to satisfy SARS, will result in physical collection steps being initiated against the appointed individual!

Collection Risks to Representative Taxpayers

Historically SARS were known to issue Final Demands, and subsequent Demand Reminders; this is no longer the case! With a number of collection measures at their disposal, SARS will not hesitate to act on the 11th business day, gunning primarily for your bank balance, and where this does not meet the full debt obligation, the Sheriff may soon be knocking on your door.

The Notice of Personal Liability is express in its collection powers, noting specifically the most drastic of measures, as the immediate go-to where there is no timeous response, or the response does not satisfy SARS:

Legal Action Measures per Notice of Personal Liability

Legally Alleviating Liability Stresses

As a first step, knowing if you are a representative taxpayer, employer or vendor, as set-out in section 153 of the Tax Administration Act, will serve to arm you for what may come should the company face SARS’ tax debt collection wrath. As the age-old adage goes, “knowledge is power”, however when coming up against SARS’ Asset Forfeiture Team, the correct legal strategy is power!

In order to protect yourself from falling victim to the fiscal pothole to be filled, it remains the best strategy that you always ensure individual and company compliance. Where you find yourself on the wrong side of SARS, there is a first mover advantage in seeking the appropriate tax and legal representation.

This will not only serve to safeguard the taxpayer against SARS implementing collection measures, but also ensure the taxpayer being correctly advised on the most appropriate, and affordable compliance strategy.

Written by Jashwin Baijoo, Head of Strategic Engagement and Compliance at Tax Consulting SA