Systemising the VAT process for the client resulted in R13m of previously unaccounted for refunds being recovered from the South African Revenue Service.

The Cause

  1. Poor record keeping through late and incomplete processing of business events.
  2. Unreliable spreadsheet accounting.

Consequences

Ongoing filing of error ridden VAT returns.

  1. Use of inappropriate VAT classifications for business events < Std Rate v Zero Rate v No Vat >.
  2. Late filing of returns.
  3. Slow response to SARS audit demands for supporting documents.
  4. Supporting Vat documents not to hand.
  5. Supporting documents that did not match VAT regulations < Quotes, Debtor Orders, Pro forma Invoices et al,>.
  6. Supporting documents that did not contain the required VAT data.
    1. Contains the words “Tax Invoice”, “VAT Invoice” or ”Invoice”
    2. The Suppliers name, address and VAT Registration number.
    3. The Business name, address and VAT Registration number.
    4. Serial number of the invoice.
    5. Date of issue of the invoice.
    6. Accurate description of the goods and / or services.

Effectively the records and returns were non-compliant in terms of the Vat legislation.

Result

  1. Penalties and Interest.
  2. Slow refund cashflow.
  3. The unilateral offsetting of differing tax product balances by SARS.
  4. Increased external audit costs.
  5. Increased Income Tax compliance costs through the filing of Supplementary Income Tax & VAT Reconciliations (IT14SD).

Solution

Establish repeatable and formal accounting systems and process for the submission of VAT returns and improve the cashflow for settlements or refunds.

  1. No penalties and interest.
  2. Timely refunds.
  3. Timely escalation.
  4. Improved cashflow.
  5. Reduced external audit costs.

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