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VOLUNTARY VAT REGISTRATION: EXTRA ADMIN BURDEN

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Article by listed accountant Thea Haddon

 

Many clients ask me to register them for VAT. This is not an issue, it’s what I do.  However, it has been my experience that many business owners have little idea of the responsibility of being VAT registered.  

This is not a criticism or insult. It is a given that most entrepreneurs / business owners are business owners because they are very good at their trade or talent.  Let’s face it, if it wasn’t for them there would be no need for accountants.

SARS, however, does not care that you are a plumber or lawyer or doctor or big wheeler dealer. If you register for VAT SARS holds you responsible for the management of that VAT.

So let us have a quick look at what being VAT registered entails:

  • Once you are registered as a VAT vendor, SARS will issue a certificate of registration.  You will need to notify all your suppliers and clients of this registration.  

  • The registration certificate will also indicate what category you fall into. This category also determines when you have to pay over the calculated VAT to SARS.  It is important that you know what your category is.

  • Now you start transacting. YOU MUST CHARGE THE CORRECT VAT ON EVERY TRANSACTION FROM NOW ON. You cannot NOT charge VAT as a favour for your friend. Please understand you can get into some serious trouble for doing that.

  • Your transactional documentation needs to be adjusted to comply with all SARS standards. In other words, there’s wording and numbers that have to appear on your invoices to make them SARS compliant.

  • Transactional recording on your bookkeeping system and physical record keeping needs to be adjusted as well.   You must keep all relevant company documentation as evidence to all VAT applicable transactions for the required 7 years according to the Companies Act.

  • At the set intervals, you need to calculate the VAT payable to the Receiver.

    1. How much VAT did you charge you customers?

    2. How much VAT did you pay to your suppliers?

    3. A minus B = payable to SARS.

  • The above is what is called your VAT return.  This return has to be submitted to SARS before the stipulated deadline and the corresponding payment must land in SARS bank account before the stipulated deadline.

  • VAT is based on what is called the accrual system. That means that the VAT is calculated on the invoices you have issued whether those invoices have been paid or not. So it is important that you budget your cashflow to cater for the VAT payments to SARS

  • Failure to comply means penalties and interest.  Penalties and interest that comes out of YOUR profits.

It is obviously in the best interest of the business (and the business owner), to ensure that VAT is managed correctly and effectively.  Remember, it’s only difficult until you know how.

For more on this call 072-021-5638

thea@haddonplus.co.za