For how long can your taxes haunt you?

In terms of section 99 of the Tax Administration Act, 28 of 2011, an assessment may not be made three years after the date of an original assessment by the South African Revenue Service (SARS), or in the case of a self-assessment by a taxpayers (such as in the case of a Value-Added Tax return), five years after the date of an original assessment. These periods are generally referred to as the prescription rules and are in place to ensure that finality is eventually brought to a tax period. Essentially, therefore, the prescription rules provide that tax periods do not remain open indefinitely. There are, however, some exceptions to the general rules.

Fraud, misrepresentation and non-disclosure

Generally, the prescription period that prohibits SARS from issuing an assessment does not apply if the reason the full amount of tax was not charged was due to fraud, misrepresentation, or non-disclosure of material facts. When the tax is a self-assessment, such as VAT and PAYE, the basis on which the period of limitation does not apply differs in that it refers to fraud, as well as intentional and negligent misrepresentation or non-disclosure.

This concept was recently under the spotlight in the Western Cape High Court in the matter of the Commissioner for the South African Revenue Service v Spur Group (Pty) Ltd (A285/2019) (judgment delivered on 26 November 2019). Although the case dealt primarily with whether contributions by the respondent to an employee share scheme is deductible for income tax purposes, the matter of prescription was also relevant, since the additional assessments relate rather old tax periods (2005 to 2009).

SARS argued that since the respondent answered “no” to certain questions on an income tax return, they assessed the taxpayer on a different basis than they would have had the question been answered differently. Essentially, SARS argued that answering “no” to certain questions amounted to “misrepresentations” and “non-disclosures” and they were therefore not prohibited from raising additional assessments.

In a minority judgement, judge Salie-Hlophe did not agree with the argument from the taxpayer that, although the question may have been answered incorrectly on a tax return, it did provide SARS with all the necessary information, being its financial documents (presumably, including financial statements), and is, therefore, by default, not guilty of non-disclosure or misrepresentation.

The judge indicated that this contention would be contra bones mores as it would amount to excusing a taxpayer in circumstances where it had not properly disclosed its own information on the tax return. Differently stated, it would exonerate a taxpayer who had made improper disclosures in his return by allowing him to rely on other documents furnished to SARS, however, ex facie his return, he had clearly misrepresented the true facts. It would offend the statutory imperative of having to make full and proper disclosures in a tax return but would also allow taxpayers to omit its true affairs and subsequently claim that the onus was on SARS to have uncovered it and acted upon it in good time. Furthermore, it would impose too high a standard of care or diligence on the SARS assessing officials. Very significantly, the judge makes the following comment:

“Completion of the tax returns is on par with a statement under oath. The taxpayer effectively vouches that it contains the truth, the whole truth and nothing but the truth.”

Consequently, the judge found that Spur’s incorrect answers to the questions in the tax returns constituted misrepresentations and non-disclosures of material facts which caused the full amount of tax chargeable in the 2005 to 2009 years of assessment not to be assessed to tax by the Commissioner.

The crucial lesson from this minority judgment is that the highest degree of diligence must be exercised when completing a tax return since it could negate any chances of relying on prescription.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)





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IC Marais

Professional experience:

IC Marais is a certified CA (SA) with public sector and private sector technical knowledge based on 5 years’ Public Sector accounting, auditing and financial management experience and 5 years audit, tax and accounting experience. Detailed knowledge of private and public sector accounting and auditing standards (GRAP, IPSAS, IFRS, IAS, ISA) and public sector financial legislation (MFMA, etc.)

He enjoys the outdoors, hunting and fishing.


Professional experience:

In 1995, Schalk started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and then Mazars Moores Rowland in 2007) in Bloemfontein. In 1998, Schalk was appointed as manager at Moores Rowland, where he became a partner in 2003. Schalk received his Postgraduate Certificate in Advanced Taxation in 2006 and in 2009 he received his Certificate in the Administration of Estates.


Professional experience:

Cedric started as a trainee at Warner and Newton (which became Moores Rowland in 1997 and Mazars Moores Rowland in 2007), Bloemfontein, in 1986. After completion of his articles, he joined the Special Investigations Division of the Department of Finance (SA Revenue Services) as a senior inspector from 1990 to 1991.


Professional experience:

Lucha started her career as a tax inspector at the Inland Revenue Department of New Zealand. After this she worked in commerce in Canada, Mexico and the United States.

On her return to South Africa, she completed her CA training contract with us and has been with Newtons ever since. She became a Partner in 2012.

Apart from her CA(SA) qualification she also holds a postgraduate certificate in Advanced Taxation (2005) and has the overall responsibility for training as our Training Officer.