The 2015 Tax Administration Laws Amendment Bill (TALAB) proposes to amend the provisions regarding reduced assessments in the Tax Administration Act (TAA). If promulgated, this would affect taxpayers by reducing the time allowed for them to request reduced assessments through the so-called ‘request for correction’ function on SARS’ eFiling to six months from date of assessment. A possible further six months’ extension could be granted in exceptional circumstances.
Taxpayers, who do not correct simple undisputed errors in their assessment within the six month time-frame, will be impacted as they may be subject to tax on amounts even if not legally obligated to pay. Furthermore, they would also not be entitled to object to these assessments after the six month period has expired. Taxpayers would then have to prove ‘exceptional circumstances’ to lodge an objection. Should the amendment be passed, taxpayers would have to be more diligent when submitting their tax returns.
Currently, a taxpayer may in certain instances request a reduced assessment within three years from date of assessment if assessed by SARS (i.e. income tax). A five year period from date of assessment is granted for self-assessment (i.e. VAT). The date of assessment for SARS assessments is the date of issue of notice of assessment by SARS. For self-assessments, it is generally the date on which the taxpayer submits the return to SARS.
In terms of the TAA, SARS may issue a reduced assessment if the taxpayer’s tax assessment contains an undisputed error made by SARS or the taxpayer on submission of the return. However, this only applies to simple errors. It would, for example, cover circumstances where the taxpayer failed to claim a deduction which they were legally entitled to claim, or where the taxpayer inadvertently made a typographical error on their income tax or VAT return.
Complex legal issues can only be resolved through the objection and appeal processes. SARS is then afforded the opportunity to allocate tax experts to consider the merits of the dispute. If SARS is in agreement with the taxpayer, SARS will issue a reduced assessment. It takes much longer to correct an error by objecting to an assessment than through the correction function on eFiling.
A taxpayer generally needs to lodge an objection within 30 days from date of assessment. The 30 days could possibly be extended in one of two manners. Firstly, the period may be extended by no more than 51 days from date of assessment if reasonable circumstances were provided. Secondly, the period may be extended beyond 51 days from date of assessment but not more than three years from date of assessment, if exceptional circumstances gave rise to the delay.
Under the proposed amendment, SARS would not, without ‘exceptional circumstances’, accept a request for a reduced assessment after the expiry of six months from date of assessment. SARS would similarly, according to existing law, without exceptional circumstances not accept an objection if it is submitted after the expiry of 51 days from date of assessment.
SARS issued Interpretation Note 15 (Issue 4) (Interpretation Note) for purposes of objecting to an assessment, which sets out some exceptional circumstances that SARS may accept. The merits of a particular case will guide SARS on whether ‘exceptional circumstances’ exist. Exceptional circumstances, subject to the particular facts and merits of each case could be:
- a natural or human-made error;
- a civil disturbance or disruption in services;
- a serious illness or accident; and
- a serious emotional or mental distress
Preparation of provisional tax returns and submission of income tax returns can be a complex task. A tax consultant can help you manage the process and ensure that the SARS deadlines are met to avoid penalties and interest.
This article was written by Erich Bell, Senior Tax Consultant at BDO SA