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January 2016

INTRODUCTION

A belated welcome to 2016 but don’t get to comfortable. Economically, it’s going to be a slip and slide instead of a climb every mountain type of year.

DEADLINES

Annual Duty – one calendar month to the day after the incorporation date

Promotion of Access to Information Act manual – 31 December 2021 extended yet again!

Provisional tax returns for the second period of the 2016 tax year – 26 February 2016

2015 Income Tax returns for Companies (IT!14) – 26 February 2016

Excel Tips

Suppose you need to add the figures contained in columns B through to M and in rows 10, 15 and 20. Using the normal method one could type the requisite formulae as =sum(B10:M10)+sum(B15:M15)+sum(B20:M20). However, Excel provides a shorter method which is =Sum(B10:M10,B15:M15,B20:M20). Excel will allow up to 30 ranges in this formula.

Tax returns

Tax clients should note that unless we receive all the relevant data and documentation at least fourteen days before the applicable submission deadline we cannot be held responsible for any punitive action taken against them by SARS.

TAXATION

Provisional Tax – 2nd period 2016

This return must be submitted on or before 26 February 2016.

In respect of taxpayers whose taxable income is R 1 million or less, the tax liability may be based on the basic amount. The basic amount is the taxable income of the latest preceding tax year as long as the assessment is issued prior to 12 February 2016. If the assessment is older than 18 months an amount equal to 8% per annum of the taxable income must be added to the taxable income to determine the basic amount, e.g., if the 2014 assessment is used the taxable income must be increased by 16% to arrive at the basic amount.  Taxpayers in this category may also use their own estimates. However, if the estimate is less than 90% of the actual taxable income as finally assessed, penalties will be imposed. Therefore, it is advisable to use your own estimate only where your actual income is likely to be substantially lower than the basic amount.

For taxpayers whose taxable income is in excess of R 1 million the option of using the historical basic amount is not available. These taxpayers must base their liability on an estimate.  Penalties will be imposed if the estimate is less than 80% of actual taxable income as finally assessed. Therefore, it is essential that estimates must be as factual as possible and careful thought be put into their preparation.

Efiling downtime

SARS has announced that their systems will be down for routine maintenance from 18h00 on Friday 12 February 2016 until 08h00 on Saturday 13 February 2016. This seems to happen every year when tax practitioners are putting in overtime to meet the year end targets.

Retirement annuities

You have only a few more days to contribute or top up your contributions in order to avail yourself of the tax saving benefit of such an action. As the law stands, currently, the deduction is the greater of:

·         R 1750

·         R 3500 less contributions to a pension fund

·         15% of your non-retirement funding income, excluding any retirement fund lump sum benefits

In calculating your non-retirement funding income, you may take into account:

·         Interest earned less the tax free exemption of R 23800 or R 34500 if you are over 65 years of age. Earnings from tax free savings products should also be excluded.

·         any travel allowance reduced by the amount of any claim for travelling expenses

Restraint of Trade

Previously, with effect from 23 February 2000, restraint of trade payments, in favour of employees and sole proprietors who were disposing of their business, were fully taxable. In an about face, this has changed with effect from 1 March 2015 and these now become only subjected to the Capital Gains provisions of the Income Tax Act as contained in the 8th Schedule. This important change was introduced without fanfare in terms of the Explanatory Memorandum to the Taxation Laws Amendment Bill 2014.

Capital Gains upon death

A taxpayer’s assets, to which capital gains tax applies, are deemed to be disposed of at the market value of the assets at date of death. Excluded from this ruling are:

·         Assets disposed of to the surviving spouse in terms of the will

·         The proceeds from any term insurance policies

·         Interest in pension, pension preservation, provident fund, provident preservation or retirement annuity funds   in the Republic

Any assets that are deemed to have been disposed of and subjected to the Capital Gains provisions will be passed to the beneficiary at the current market value and that will be the base cost that the inheritor may use, for CGT purposes, upon his/her subsequent disposal of the asset.

However, if subsequent to date of death, the executor disposes of any such asset, the liability for Capital Gains Tax must be met by the beneficiaries of the estate.

BUSINESS

 

Credit management

An irreverent look at some myths

·         It is normal to have debtors – wrong! You’re not a charity organisation. Clients only become debtors if you allow them to.

·         You are in business to help people. Wrong! That is what charity organisations are for. You are in business to make money. Debtors are customers to whom you grant an interest free loan. Who does that in the world of finance? Tell us and we’ll apply for one!

·         If you apply stringent collection procedures you will chase debtors away. If that’s the case you don’t need them. Find replacements who will appreciate you being businesslike.

·         Our customers are our friends. When did you last invite them to your house for a braai? You provide them with a service in return for a reasonable reward.

·         Looking after clients ensures they will look after you. Nonsense! Just try relaxing your service levels without a price reduction. You won’t see ‘em for dust!

The right approach

1.             Spell out your terms – we will provide you with a top flight service. In return, we expect you to abide by our terms. Any deviation from these will not be tolerated and will result in the immediate instigation of stringent collection methods – the big stick – no not literally, that would be a crime mores the pity.

2.             Make sure your systems are designed to facilitate the procedures in 1 (above)

3.             Make sure your staff are aware of the policy and apply it.

 

ECONOMY

 

According to one commentator, with whom we concur, the labour movement is weaker now than at any time since the transition into democracy. Employers may laud this but it is a double edged sword insofar as militancy levels tend to rise in these circumstances.

Just what does that mean for our economy which is already under pressure for various reasons? Among others, these are:

·         Poor management and corruption – Nenegate is a mere part of this

·         Diminishing growth – to a large extent due to events in the economy of our biggest trading partner, China.

·         Currency weakness – to some extent due to dollar strengthening but also to the above factors

·         Drought

These factors have contributed to the downgrading of the country’s credit status to just above junk status. This will impact upon the government’s ability to borrow funds to meet its development goals and mean that a further burden will be placed upon citizens to meet this deficit or a reduction in the development goals. Given the desire to stay in power, it is highly unlikely that such a reduction will occur. Further, its is unlikely that there will be any call for contributions to the kitty by the lower level wage earners. Therefore, it seems likely that the budget will place additional financial burden upon the middle to upper echelon earners and corporate taxpayers.

Now, factor in the ensuing labour militancy that is likely to occur during the middle of this year. The upshot is a possibility of a further credit rating downgrade, higher inflation levels particularly in food prices, further rises in the unemployment figure with the attendant rise in poverty driven crime and a general lethargy in the work place.

Astute businesspersons should be making provisions to cope with these possibilities rather than react when they occur.

 

TAILPIECE

“I don’t know where I’m going from here but I promise it won’t be boring.” – David Bowie