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Any small business owner in the Western Cape can testify to the pressures of staying afloat. The last thing you need is issues with the South African Revenue Service eating into your time, money, and peace of mind. Fortunately, most SARS-related problems are avoidable and not caused by dishonesty. They are mostly the result of simple ignorance or sloppy administration.
Below, we discuss common stumbling blocks for small businesses and how to prevent tripping over them.
Delayed submissions are one of the fastest ways to rack up penalties with the taxman. SARS works on strict timelines for VAT, PAYE, and provisional tax.
How to avoid it:
Create a clear tax calendar with reminders for every submission (find details about important dates here). Better yet, work with an accountant who tracks this for you.
Small businesses often lack established bookkeeping practices, leading to incorrect or incomplete documentation. Missing, unclear, or inconsistent records can pile up to a significant problem during a review or audit.
How to avoid it:
Keep all financial records organised and up to date. Use cloud-based accounting tools or work with a professional to guarantee everything is captured correctly and consistently.
Small business owners often blur the line between personal and business expenses. This not only hinders business growth and accurate insight into your financial situation, but it can also create complications when submitting returns or justifying deductions.
How to avoid it:
Make a mindset shift to partition business and personal finances. Open a dedicated business bank account and keep all transactions separate to maintain cleaner records.
Not every expense qualifies as a tax deduction. Claiming personal costs or non-allowable expenses can raise red flags with SARS.
How to avoid it:
Educate yourself on what qualifies as a legitimate business expense or get professional guidance. When in doubt, rather leave it out than risk a penalty.
Many businesses either register too late or assume they do not need to register at all. In South Africa, VAT registration becomes compulsory once your turnover exceeds the newly set threshold.
How to avoid it:
Monitor your revenue closely. If you are approaching the VAT threshold, plan ahead to register on time and steer clear of penalties. An accountant or tax consultant is an invaluable partner in this process.
We know – e-mails or letters from SARS are not exactly a riveting read. However, overlooking this communication can lead to costly non-compliance issues.
How to avoid it:
Prioritise correspondence from SARS. Check your profile regularly and respond quickly to any requests. If you are unsure what something means, get expert advice before taking action.
As a small business owner, you often have to wear many hats while your business finds its feet. However, there are areas where DIY can cost rather than save your money. Tax compliance can be tricky if you are not educated in it, and this is probably a field where most businesspeople can benefit from the help of an expert.
How to avoid it:
Partner with a qualified accountant who understands business realities. This ensures your tax obligations are handled correctly and optimally while you focus on making your business a success.
Most SARS compliance issues in small businesses come down to inadequate knowledge or structures. However, with the right systems and support, taxes can become a manageable part of running a fruitful business.
If the thought of taxes overwhelms you or sucks the joy out of entrepreneurship, it may be time for you to rope in expert help to ease the pressure and eliminate costly compliance mistakes.
Our highly skilled team at Huysamen Westraad has your back. Please contact us for the tax support your business needs.
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