Tax nightmares among owner-managed businesses and SMEs are costly and time consuming, particularly relating to tax queries and disputes with the South African Revenue Services (Sars).
By simply implementing key preventative administrative steps, business owners can actively avoid or at least reduce the risk of these tax mistakes from arising.
Inaccurate accounting information Mistake
The accuracy of the underlying accounting information and supporting documentation is directly responsible for the integrity of a taxpayer‘s income tax return. In the case of SMEs, this integrity is often queried as a result of a lean accounting function and confusion in distinguishing between the financial affairs of the business owner and the business.
Sars tax auditors are first and foremost focused on testing the reliability of accounting books and records, by, for example, reviewing cash accounting records for unusually large or ad hoc payments, on the basis that these often represent private expenses which have been processed as business expenses and claimed for tax purposes.
The importance of accurate accounting information and supporting documentation is further compounded by tax regulations requiring taxpayers to maintain proof of all income and expenditure as well as maintaining business documentation in a particular format, for example, VAT invoices.