The South African Revenue Service (SARS) has provided clarity and guidance on when it will prohibit the registration of a prospective tax practitioner and when it will be obliged to deregister a practitioner due to “non-compliance”.
SARS has in the past raised tax practitioner non-compliance as an area of concern. It has stated in public that tax practitioners in their personal capacity have outstanding debt of about R1 billion.
The Tax Administration Act (TAA) has specific provisions pertaining to the registration and deregistration of tax practitioners.
However, it appears that SARS has had some difficulty in enforcing the provisions. There has also been confusion how to interpret the provisions, says Julia Choate, tax partner at Bowmans.
The TAA specifies that a person who provides tax advice, or who assists with the completion and submission of a return on behalf of someone else for compensation, must register with or fall under the jurisdiction of a recognised controlling body and register with SARS.
Interpretation note
SARS published Interpretation Note 132 at the end of July to clarify the two conditions that must be satisfied before SARS can prohibit registration or is obliged to deregister a person in the event of non-compliance.
The two conditions are:
- the prospective or registered practitioner must be tax non-compliant for an aggregate of at least six months during the preceding 12-month period; and
- the prospective or registered practitioner must have failed to demonstrate compliance or remedy non-compliance within the period specified by SARS in a notice.
Choate says the aggregate six months means any mathematical six months during the preceding 12 months. They do not have to be consecutive, but it must be at least six out of the 12 months. The second condition is obviously where SARS sends a practitioner a notice and he or she fails to respond to the notice within the period specified.
“Two strikes and then SARS must act. If both conditions are not satisfied, then SARS may not prevent someone from registering, or deregister someone,” she says.
ENSafrica’s Mmangaliso Nzimande and Oreneile Jibilili explain that the “preceding 12-month period” will be determined by examining the prior calendar year to determine the calendar months in which the tax practitioner did not qualify as compliant.
Non-compliant months include the months the prospective or registered tax practitioner:
- was not registered for tax as required;
- had outstanding returns or tax debts;
- submitted a return or payment late; or
- failed to make arrangements with SARS in relation to returns or payments.
Due diligence
Choate says although the registration process is not “bullet proof”, it does incorporate a satisfactory amount of due diligence to protect the tax practitioner, SARS, and taxpayers.
“It is impossible for SARS to monitor each person 24/7 to ensure they are ethical, dispensing perfect tax advice, and are completely compliant in every aspect. It is just not realistic and beyond the scope of even the most advanced revenue authority to manage that.”
She does express concerns that SARS wants to take a “harder line” around perceived non-compliance in circumstances where non-compliance is often as much SARS’s’ fault as that of the non-compliant person.
“What if SARS is the reason why you cannot rectify your non-compliance in the time provided? One would hope that SARS would be understanding and not to simply revoke registration.”
Nzimande says tax practitioners are held to a high standard. They are required to be tax compliant or to remedy their non-compliance within a reasonable time.
“This level of accountability is essential for persons who are charged with fiduciary duties. It further fosters integrity, honesty, and reliability in tax practitioners,” Jibilili adds.
Line of defence
The first line of defence is that anyone who offers advice or assists with a tax return for consideration must register with SARS. The second line of defence is that the tax practitioner must be registered with a recognised controlling body.
If someone has done anything to be excluded from the jurisdiction of a recognised controlling body, the person can be prohibited from registering and must be deregistered.
Choate says tax practitioners should expect much closer scrutiny from SARS in future. “The publication of the interpretation note signals to all of us that tax practitioner compliance is very much on SARS’s radar.”
Tax practitioners need to adopt a more rigorous approach to compliance. “They need to understand that without a registration status as tax practitioner you can’t do your job.”
Profile hijackings
The Office of the Tax Ombud (OTO) says it has found evidence that a small minority of tax practitioners may be complicit in the hijacking of taxpayer profiles.
OTO senior manager Talitha Maude said during a recent webinar the Office has encountered at least three cases where there have been complaints about refunds being paid into the “wrong” accounts because of hijackings. SARS’s investigations indicated there were no hijackings.
The OTO has identified profile hijackings as a systemic problem and received permission from the Minister of Finance to investigate the matter and make recommendations how to remedy the problem.
Amanda Visser is a freelance journalist who specialises in tax and has written about trade law, competition law, and regulatory issues.
Disclaimer: The views expressed in this article are those of the writer and are not necessarily shared by Moonstone Information Refinery or its sister companies. The information in this article does not constitute financial planning, legal, or tax advice that is appropriate to every individual’s needs and circumstances.
