PAYE for businesses

[Chatmaster]

The funniest thing has been happening the last couple of weeks. On two occasions 2 separate, very reputable training companies for which I do lecturing wanted to deduct 30%+ of our invoice for PAYE. Now if I was an individual I could understand that, but these are invoices through 2 of my CC's one is even VAT registered. So the one finance manager told me to phone SARS and take it up with them! Geeeezzzzzz

[garthu]

I would very interested in the response once done cause that really doesn't sound right! Sounds more like they got the wrong info... Convincing them otherwise should also be interesting

[Dave A]

Ask for an IRP5

Just in case it's a cash flow dodge...

[Chatmaster]

I spoke to my auditor about it. CC's and Pty's do not pay PAYE for logical reasons. Their scemes are simple, they get a VAT invoice, deduct 33% of the payment for "PAYE" and then claim back the 14% VAT which cuts their expenses by half. After a while when SARS are all over the individual for outstanding PAYE, they simply state that they have no idea what we are talking about, they were invoiced by a company and are therefore not legally responsible for the deduction of the PAYE as it wasn't an individual.

Just the pure arogance makes me angry, grrrrrr

We will ask for the IRP 5, which means they will urgently need to get the individuals details because they certainly can't make it out to the CC's. Needless to say that creates a completely new problem as the invoices comes from the company and the tax and PAYE are also done through the CC's, we are going to have a couple of headaches with our books and it is peeving me to waste valuable time on their greed.

[Dave A]

This is going to be even sweeter if the liability was incurred in the 2009 tax year. Too late to go fiddling with EMP201 returns

[Yvonne]

Are they trying to claim that you as the training facilitator are an independant contractor. (Which means that 80% of your income must come solely from their company before they are legally responsibile to ensure SITE is deducted?).
Site could never ever be deducted from a formal invoice.

Even if you were an "official" independant contractor, you would not issue an "invoice".
There are no invoices involved for an independant contractor as far as I know. The person goes on the payroll for a "contracted" figure.

A letter to them stating that you confirm that your income from other sources exceeds the requirement of an independant contractor, should be sufficient to sort out this problem.

I personally would completely refuse to participate in the IRP5 route!
The full amount of the invoice must be paid, and I would proceed to treat it as a overdue invoice.
There would never be an opportunity for them to deduct a % for taxation from the invoice on these grounds.
Advise them that as your invoice is a formal invoice from a CC or company (especially registered for Vat), the legal responsibility for taxation is your own! and that they have no grounds for deducting any taxation from the invoice.

Yvonne

[Dave A]

Yvonne, you're right - but

I personally would completely refuse to participate in the IRP5 route!

I've got a hunch this might flush out any mischief right quick, particularly given the timing.

And what a perfect paper trail.

They have already said "talk to SARS." Rather than butt heads, sometimes it's smarter to adopt a different angle of attack.

This example is also food for thought on the practical implications of turnover tax.

[insulin]

you lost me... Probibly why I still only urn R3000 a month...

[garthu]

very reputable training companies

Aha!

It's amazing what people can up with times are tough. Makes sense but would NEVER have thought of something like that! However, they are playing with the devil! When SARS catches up, there'll be hell to pay

[Yvonne]

Our auditor suggested that we watch a program on Summit Television - on Channel 415 DSTV at 5.20 TONIGHT!

A discussion on new business regulations: he said it is a possibility that the government are going to reduce the "audit" requirements and possibly going to increase the threshold of turnover, (Higher than the present discussions of R1,000,000) - imagine the chaos if the average small business is no longer required to retain "the paper trail", and only pays a turnover tax!
Yvonne

[duncan drennan]

Yvonne, you're right - but

Dave, you lost me there. Could you explain your thinking slowly so that I can understand your point?

[Dave A]

Quite often there are different ways to overcome a challenge.

Basicly Yvonne's strategy is standing on principle. Nothing wrong with it if you don't mind confrontation. But opening the door to bigger problems can sometimes be more effective in getting the result you want. You can't go to jail for debt, but you can go to jail for fraud.

Perhaps more relevant in this instance, Roelof has already challenged the validity of the deduction and effectively been told to sod off.

[duncan drennan]

Got it, thanks. Nice strategy (now that I understand).

[Yvonne]

Last nights program discussion was about Directors Liability, and changes in the rights of Employees in the event of liquidations or retrenchments and did not refer to the threshold of turnover which requires a full "audit" - apologies.

Although in my own opinion, the heavy emphasis on Directors and Senior Management liability is a form of forcing responsibility and liability for non disclosure, as they have done in the present situation where the auditor is "Required" by law to advise SARS of any irregularities.
So if they do reduce the audit requirement, directors and management can be held liable if anything untoward comes to light, so a form a forced self governing.

I had never heard of this program before, unfortunately being screened at 5.20 p.m. makes it difficult to get home in time to watch!

Yvonne

[Yvonne]

Going back to our discussion, going the IRP5 route may "solve" your immediate problem, except you have "lost" 30% to your cash flow -and now the bookkeeping aspect is a total nightmare.

The entire invoice would have to be credited, the person involved in the training would have to be "paid" by the client in his personal capacity, - no company invoice! and use the IRP5 to recover the SITE deduction again in his personal capacity.
If you accepted their terms that he is an independent contractor - which he is clearly not!
The criteria for independent contractor - is that the person is "supervised" in their duties and performance, with regular hours, and are payable at regular daily, weekly, monthly or other intervals.

So going along with something that is clearly not correct, is merely exacerbating the incompetence in my opinion.
Who is going to "teach" them to do it correctly (assuming innocence of any attempted fraud).

There is no "facility" to recover SITE deducted from an invoice in any bookkeeping system, nor S.A.R.S. codes on your company annual return to S.A.R.S. for SITE paid to another company.

It is simply not possible to accept incompetence or potential corruption, without causing administration problems for yourself.

End result, client continues to be a problem, and you increase your own problems.

Either way, you are going to "write-off" that 30% in my opinion.

Yvonne