Small and medium size companies that have recently taken advantage of the amnesty offer by South African Revenue Services should be prepared to pay capital gains tax on the total tax amount they have “saved” through the amnesty.
According to Stephen Corrigan, MD of Softline Pastel Payroll, the tax that should have been paid but which has been waived by SARS through the amnesty, now remains within the companies’ balance sheets and represents a capital gain.
“As a capital gain, the amount is taxable and SMEs that have amnesty should be prepared for this. They also need to be focusing on how they go forward into the future and the platform for this will be to establish systems that will enable them to start keeping adequate records of accounts, payroll, employee taxes and VAT.”
Corrigan says the process of automating financials and payroll is not as onerous a task as many people would believe. “An SME company that now has amnesty will start with a clean slate and is effectively SARS compliant. However, management will have to ensure it maintains compliancy by using software to automate the financials and payroll. Only then can they sleep peacefully at night.”
In today’s complex and increasingly automated tax environment, manual administration of payrolls is a nightmare.
“Payroll software will ensure that PAYE, UIF (unemployment insurance fund), SDL (skills development levy) and other returns such as the EMP 201 will always be accurately calculated and lodged within the deadlines, “says Corrigan.
"An automated payroll makes the nightmare quickly disappear by ensuring easy, full compliance with all of the tax and legal issues and accurate processing of the individually complicated employee portions of the payroll.
“Where companies do not have dedicated payroll software it means that at best their payroll administrators run these complex functions off a spreadsheet and in today’s environment that is simply inadequate and inefficient.”
Corrigan adds that it no longer makes sense to manually attempt salary or wage tax deductions, UIF and SDL payments or the issuing of IRP5s which place a huge burden on the payroll administration. Just keeping up to date with the latest changes in legislation or taxation codes is difficult enough.
“For statutory EMP201 submissions with calculations relating to UIF and SDL, for example, administrators need to account for a number of inclusions and exclusions towards leviable amounts. Administrators would need an in-depth knowledge of the related acts to ensure all PAYE, UIF and SDL submissions are accurately calculated.
“Automating the process means the system correctly makes all of the necessary calculations for the administrators, giving companies peace of mind and at the same time ensuring they are not paying more than they should.
"For the average SME, applying for the tax amnesty was the easy part. To maintain adherence to the legislation going forward is the difficult part. Companies can be assured that, having applied for amnesty, they are on the SARS radar screen and will be monitored closely from here onwards."