Happy New Year
Happy New Year! No, I am not a little slow … I’m talking about the new financial year, which started (for most) on the 1st of March. The date today is the 3rd of March. Last week the budget speech was delivered by finance minister Pravin Gordhan and the 1st of March marked the first day of the new financial year.
The 1st of March is similar to the 1st of January in that on both days you may have woken up feeling a little worse for wear. However, the 1st of March will most likely have been due to the pressure of getting all your financial information together for your accountant in order that they can submit your relevant returns on time causing you to wake up the next morning suffering from symptoms like headaches, disorientation and even nausea when you realized how much tax money you had to hand over.
Through the budget speech Mr Gordhan has come up with some new year’s resolutions on our behalf, promising to make better use of our tax money and even save some of us some money.
As the new financial year kicks off I thought it would be a good idea to look at the year ahead and see what is on the calendar.
By the way when we talk about the financial year we are now in 2014 and not like the calendar year, which says we are in 2013. The financial year is named according to when it ends, ie February 2014.
VAT
For those of you that are VAT registered you probably already know that you have to submit your VAT returns every two months. At the end of your financial year your VAT that you have paid over will need to tie up with your financial statements that are prepared.
Generally if you have paid more VAT during the year than your balance sheet reflects then SARS may think that you have made more money than you are reflecting and could say that you need to reflect all your revenue and therefore will be liable for more income tax.
It would be prudent therefore to ensure that your accountant has your books to match your VAT returns every couple of months so that it is easy to tie together at the end of the financial year.
PAYE
If you employ staff members then you will have to submit PAYE returns by the 7th of each month, for the month that has just gone by. This will include paying over the PAYE that you have deducted from your staff member’s salaries as well as UIF (Unemployment Insurance Fund) and SDL (Skills Development Levy).
It is very important that you actually pay over the PAYE each month on behalf of your staff members as it is your responsibility as their employer to do so. Not only will you incur penalties and interest but you will still have to pay over the money and not doing so will also cause problems between you and your employees.
PAYE reconciliations
Twice a year the PAYE payments that you have been on a monthly basis need to be reconciled with SARS, usually at the end of October and end of May. If any money has not yet been paid over to SARS for PAYE deducted then it will need to be resolved at this time.
The big idea behind the monthly returns and the bi-annual reconciliations is so that when your staff do their own returns all of their information is already in the SARS system.
Individual returns
Your staff will need to do their own submissions (usually at the end of October if they are not provisional tax payers). This will be for their salary earned up to February 2013. This will be their final return for the period in question and SARS will do an assessment of the return and advise them of any tax they still need to pay over or alternatively refund them if they have paid too much tax for the year.
Provisional tax payers
If your staff do other work in their personal capacity, like weddings, photo shoots, matric dances etc, then they should register as provisional tax payers in order that the additional income they earn outside of your salon is declared every 6 months (31 August and 28 February). This will help them to avoid having a large tax liability when they do their final tax return. Staff members can deduct all their expenditure they incurred in generating their additional income, for example travel to jobs and any products used.
As a business owner you will also most likely need to be registered as a provisional tax payer and do the same two provisional tax returns. This is generally the case due to the fact that you are not a salaried employee in the same way that your staff are and you earn variable income from the profits of your business. Also, any additional income apart from what you earn from your salon would be declared at the two provisional returns.
Provisional tax payers normally only need to submit their final returns at the end of January the year after the tax year in question, ie for the tax year ended February 2013 provisional tax payers will submit their final returns at the end of January 2014.
Company Provisional Returns
In the same way that individuals pay provisional tax every six months, so too would your salon. This helps prevent you getting into a situation where a year after your company’s financial year end you find that you have a big tax liability to pay over to SARS. Rather by doing it every 6 months it keeps it more current and helps prevent any ugly surprises when your final return is submitted.
Company Final Returns
A company’s final tax return is usually due one year after its own financial year end and in most cases this will be 28 February. Therefore if, 28 February came and went without you realizing that your tax return was due then you should take this up with your accountant.
Conclusion
It has been my experience that accountants do not always follow up with you in order to make sure that your tax returns are submitted on time. Therefore it would be a good idea for you to find out when all of your relevant deadlines are and make sure that they are all submitted either by you or by your accountant. It would also be a good idea for you to assist your own staff members in keeping their own returns up to date because if they fall behind it will catch up with them eventually and will be something that distracts them from work, which in turn affects your own business.