January 2011
INTRODUCTION
It
is our fervent wish that 2011 will prove to be a year filled with
achievement and good fortune for all residents of this wonderful
country.
T
ECHNOLOGY
Adjusting
the width of a column to the widest item in the column can be
achieved by hovering the cursor over the right hand boundary line
of the column until a double-headed arrow appears and then
double-clicking the boundary line. One can adjust the width of
many columns by selecting multiple columns and double-clicking
when any double-headed arrow appears on one of the column borders.
Unfortunately,
it sometimes happens that the column that is being resized will
contain the sheet heading and the column width will be set to
accommodate that heading. In that case, it will necessary to
resize that column by selecting the next widest item in that
column and using the Format/Column/Autofit Selection command. To
do this, select the cell containing the next widest items and,
using the keyboard, type Alt+O, C, A.
TAXATION
Provisional
Tax due 28 February 2011
Provisional
tax returns for the second period of 2011 are due on or before 28
February 2011. For taxpayers whose taxable income is less than one
million rand, the estimate may be based on the base amount
reflected on the IRP6 form or 90% of their actual taxable income.
It is advisable to utilise the latter option only where the
estimate is likely to be substantially less than the base amount.
The base amount is calculated with reference to the latest year
assessed. However, where that year is not the 2010 tax year, the
base amount must be increased by 8% for every year, e.g., if the
last assessment issued is for the 2008 year, the taxable income
for 2008 will have to be increased by 16%.
Taxpayers
whose taxable income exceeds one million rand will need to prepare
an actual estimate of their 2011 taxable income. That estimate
must be accurate to at least 80% of taxable income when eventually
it is compared to the taxable income computed on your 2011 tax
return.
Penalties
will be imposed should the 80% or 90% level of accuracy, whichever
is applicable, not be achieved. The penalty will amount to 20%
of the tax arising from the shortfall.
Fringe
benefits – company cars w.e.f 1 March 2011
Employers
who supply company cars as part of employees’ conditions of
service will need to amend their payroll package to cater for
amended regulations that come into force on 1 March 2011.
From
that date, the following applies:
-
Whereas previously VAT was excluded from the determined value
upon which the fringe benefit value was based, from 1 March
the value must include VAT
-
The
value of the fringe benefit to be included in the employee’s
gross remuneration will be result of multiply the determined
value, above, by 3.5% or, where the vehicle is subject to a
maintenance plan, 3.25%. However, only 80% of the fringe
benefit value will be subjected to PAYE
-
Upon
submission of his annual tax return, the employee will have to
prove, by means of a logbook, the ratio between business and
private travel. That ratio will be applied to the annual value
of the fringe benefit to determine the actual private usage
value. The difference will be claimed as a deduction. E.g., an
employee uses a company car valued at R 200 000 throughout the
year. The value of the fringe benefit will be R 84000 (R200
000 x 3.5% x 12). PAYE will be withheld on 80% of R 84 000.
Upon assessment, the employee’s logbook shows that he
traveled a total of 36 000 kilometres during the year of which
12 000 kilometres were for business purpose. Therefore, he
will be permitted a deduction of R 28000 (12000/36000xR84000)
-
If
the employee bears the full cost of licensing, insuring and
maintaining the vehicle, the value of the fringe benefit may
be proportionally reduced. The reduction is calculated by
applying the percentage that private kilometres traveled is of
the total kilometres traveled to the cost incurred by the
employee.
Preparing
for the 2011 year end – stock taking, odometer readings
With
the approach of the financial year end, those clients who trade
should make arrangement to determine the quantity and value of
trading stock on hand as at 28 February 2011.
Clients
who are in receipt of a travel allowance should record the
odometer reading of the vehicle on that date. They should also
ensure that their vehicle logbooks are up to date, as without a
logbook, they will be unable to claim for business travel and will
be subjected to tax on the full value of the travel allowance that
they received for the year.
DEADLINES
Voluntary Disclosure Programme – 1 November 2010 to
31 October 2011
Annual
Duty – end of the month following incorporation date
Companies
and Close Corporations 2010 tax returns – 28 February 2011
New
Companies Act & Consumer Protection Act – no new CC
registrations – 1 April 2011
Disposal
of a residence from a company or trust – 31 December 2012
A
draft guide to this dispensation may be downloaded from
www.sars.gov.za
ECONOMY
Whilst
our economy is indeed in recovery, economic growth is likely to
remain relatively slow throughout 2011. The main negative
influence on our growth will be the stagnation of the economies of
certain Euro zone countries who collectively consume as much as
26% of our exports.
A
further brake to our growth has been the strength of the rand
which has impacted negatively on exports and on tourism.
Interest
rates seem to have settled and are unlikely to move in any
direction during the year. This will have an adverse effect on
persons who depend on interest bearing investments.
Undoubtedly,
events in the
Middle East
will have a significant impact on fuel prices in the short to
medium term and this will have a knock on effect on consumer
prices. If such an impact is sustained, it will influence the
inflation rate and, possibly, result in a further interest rate
reduction.
However,
as the economy continues to recover, a moderate reversal of job
losses is expected.
FINANCIAL
PLANNING
Persons who are involved in
partnerships and as members of private companies or close
corporations together with others should give some thought to the
situation that may arise should one of them die or be severely
disabled.
If no planning for those
eventualities take place, the business entity and/or its surviving
members could suffer severe financial damage as it would be
necessary, in the case of death, to pay out the value of the
deceased’s share in the business to his or her estate. In the
case of disability, it may be necessary for the entity to carry
the disabled member without him/her making any further
contribution to its success.
Both these contingencies may be
covered by the members entering into a buy and sell agreement and
taking out policies on each other’s lives to cover the eventual
cost of a member withdrawing from the relationship. Should an
arrangement such as this not be entered into, it may be necessary
for the survivors to accept the deceased’s heir as partners in
the business. Those heirs may not have the skills or motivation to
make a significant contribution to the business.
A buy and sell agreement is one
wherein the parties agree that, in the event of the death or
disability of one of them the remaining member or members will
acquire the dead or disabled member’s share. The method of
determining the value of the share is stipulated in the agreement.
Funding of that value is via a life assurance policy with a
disability provision. Usually, premiums are subject to an annual
escalation to provide for the growth in the value of the business.
Capital Gains Tax implications will
arise in the hands of the deceased’s estate. This is calculated
as follows:
Market value at date of death
less
the base cost at date on which the
shares were originally acquired
less
an amount of R 750 000 as provided in
Paragraph 57 of the Eight Schedule to the Income Tax Act. The
conditions pertaining to this allowance will appear in our next
issue as will additional precautions to be taken to avoid adverse
impacts on the business caused by a member’s withdrawal.
Twenty five per cent of the result of
that calculation will be included in the deceased’s taxable
income and will attract tax at his/her marginal rate.
TAILPIECE
"Ask
a question and you're a fool for three minutes; do not ask a
question and you're a fool for the rest of your life."
(Chinese proverb) |
