MAY 2010

INTRODUCTION

By the time you read this, the filing season for employers will have finished. It has not been without its difficulties and we can only hope that the income tax returns will be correctly populated and issued as soon as possible and that the SARS system accepts the data that has been filed timeously by the employers without issuing penalties for late submission.

TECHNOLOGY

Excel users can adjust the direction in which the cursor moves after an entry has been made in a cell. To modify the direction, select Tools| Options| Edit. By removing the tick in the box next to “Move selection after entry” the cursor remains at the cell where the last entry was made. By leaving the box ticked, one can select the direction of movement by clicking on the arrow next to “Direction”.

To place borders around a range of cells, select the range and then press CTRL+SHIFT+&. To remove the border, select the range and then press CTRL+SHIFT+_ (underscore).

TAXATION

Fringe Benefits – company cars

In terms of a bill that has been published, with effect from 1 March 2010, the amount that must be included in the employee’s taxable income has been increased to 4% of the determined value with 3.2% of that amount subjected to PAYE. The determined amount, in respect of cars, will now also include the VAT on the acquisition price as well as any amount in respect of maintenance agreement. Upon assessment, provided that the employee is able to produce an accurate logbook, the amount included in his tax assessment may be reduced by the percentage that the business use bears to the total distance travelled. Where the employee has also borne certain of the running costs, further reductions of the taxable amount will be allowed. This reduction will be calculated, based on the aforesaid percentage, as applied to the current fringe table, in respect of fixed costs, fuel and other expenses.

Lump sum benefits on retrenchment

Previously, where an employee was awarded a severance award on retrenchment, the first R 30 000 thereof was treated as tax-free. However, with effect from 1 March 2011, that allowances falls away. Thereafter, severance awards will be treated in the same manner as withdrawals from retirement funds. They will be subjected to the terms of the special retirement table of rates and be eligible for inclusion in the R 300 000 lifetime tax-free deduction.

Key Person Insurance Plans

In the past, employers effected policies on the lives on key employees and, when that employee retired, paid the proceeds to him/her as a retirement gratuity. The employer was allowed the premiums on the policy as a deduction from income. The law relating to the deductibility of premiums and to the severance awards resulting from such policies will be drastically changed in terms of the proposed tax amendments. Some of these amendments will take effect from years of assessment commencing on or after 1 January 2011. Clients contemplating entering into such a contract are advised to consult their tax advisor before doing so.

Preparing for submission of tax returns –Individuals

The following is a list of documentation that we need to enable us to prepare your tax return. Whilst it is fairly comprehensive it is not exhaustive. Items in italics are required from business owners, company directors or members of Close Corporations.

• A monthly log sheet in respect of the vehicle that you use for business. This should reflect opening and closing odometer readings for each day and a column that splits the distances travelled between business and private. An explanation for each business trip should also be provided.

• A statement of assets and liabilities as at 28 February 2010

• Invoices in respect of any new assets acquired, any improvements made to existing assets and details of any assets sold with the sales price thereof

• Any new instalment sales agreements and statements in respect of those agreements and existing ones.

• Medical accounts that you have paid without claiming from your medical aid or for which the claim was rejected indicating the reason for the rejection

• All bank statements from overseas banks where interest is reflected

• An IRP5 from your employer and from retirement funds in respect of any lump sum payouts together with a copy of the tax directive relative to the lump sum.

• An IT3 certificate from each financial institution with which you have investments. In the case of unit trusts, this will include an IT3(C) that reflects Capital Gains Tax information.

• If you sold an asset, such as land and/or buildings, details of the purchase and sales price will be needed as well as documentation supporting relating to improvements carried out by you.

• A certificate of contributions and member’s share of expenses from your medical aid scheme.

• An interest certificate from your medical aid scheme in respect of interest earned on the savings portion of your contribution.

• Contributions certificates from assurance companies for contributions to retirement annuity funds and income continuation policies.

• If you changed your bank account since your last tax return was submitted, details of the new account must be provided (see below)

DEADLINES

Promotion of Access to Information Act- 31 December 2011

When the Act was originally promulgated in 2005, we assisted existing clients in the preparation of the manual that the Act requires to be submitted by all entities to the Human Rights Commission. Since that time, the composition of our client base has changed and it is possible that some clients have not complied with this requirement. Should you be in doubt as to your compliance, you are urged to contact on of our consultants.

Annual Duty – end of the month following incorporation date

Consumer Protection Act – October 2010

New Companies Act – no new CC registrations – approx. July 2010

Employers’ Tax Season – 1 April to 31 May 2010

ECONOMY

The full impact of the Transnet strike has still to be felt. It is likely that this will have a profound effect on the balance of payments. The recent weakness of the rand may have contributed to the deficit on that balance with foreign producers dumping surplus production on their South African agents.

One of the consequences of the strike is likely to be the shedding of jobs in those sectors of the economy that rely upon rail transport and, to some extent, on the fuel pipeline. Added to the further hike in electricity costs that will be implemented in July, the strike is likely to result in inflationary pressures. Those pressures will come into consideration when the SARB deliberates on changes to the interest rate.

BUSINESS

The Prevention and Combating of Corrupt Activities Act

Where one party gives to another and that other agrees to accept a gratification in return for performing an illegal, dishonest, unauthorised or biased act, such agreement constitutes corruption in terms of the Act. The Act places an onus of reporting such activities to the SAPS and provides for severe penalties for non-compliance.

Businesses would be well advised to study the implications of the Act in respect of their entertainment and inducement policies.

STAFF CHANGES

Sadly, Diane von Blerk, who had been with the practice for some twenty years, left our firm on 14 May 2010 to move to Johannesburg. Lynn Kydd will undertake her role.

TAILPIECE

“Learn from the mistake of others. You can’t live long enough to make them all yourself.” (Eleanor Roosevelt)