VAT: representative vendor liability

[duncan drennan]

This is a purely technical question - I understand the practical implications of being the "representative vendor" for VAT (for those who don't know, the representative vendor is a natural person who is personally liable for the company's taxes).

So a question about the phrasing of something from the VAT Act

Section 48.

2) Every representative vendor shall as respects moneys controlled or transactions concluded or anything done by him in his representative capacity be liable for the payment of any tax, additional tax, penalty or interest chargeable under this Act in relation to such moneys or transactions as though such liability had been incurred by him personally, but such liability shall be deemed to have been incurred by him in his representative capacity only.

Now, I understand everything up to the part that I've highlighted - I'm not 100% sure what they mean by that. Any interpretation from the big boys (and girls) around here?

[Dave A]

Basically, you are not liable for any debt in your personal capacity. Provided, of course, that you perform as expected in your representative capacity.

The time to get nervous is if SARS asks for a surety.

[duncan drennan]

My understanding is that this effectively implies surety, along with this clause...

9) Where a vendor is a company, every member, shareholder or director who controls or is regularly involved in the management of the company’s overall financial affairs shall be personally liable for the tax, additional tax, penalty or interest for which the company is liable.

Am I misinterpreting?

[Dave A]

In respect of a representative vendor, pay close attention to subsection (3):

For purposes of subsection (2), any tax, additional tax, penalty or interest payable by any representative vendor in his representative capacity shall be recoverable from him, but to the extent only of any assets belonging to the person whom he represents which may be in his possession or under his management, disposal or control: Provided that any tax, additional tax, penalty or interest payable by a company shall not be recoverable from the public officer of the company but shall be recoverable from the company.

The representative vendor is reasonably protected. However, he should take note of subsection (6). This sets out when the representative vendor can become personally liable:

Every representative vendor shall be personally liable for the payment of any tax, additional tax, penalty or interest payable by him in his representative capacity, to the extent that it remains unpaid, (if?)-

a) he alienates, charges or disposes of any money received or accrued in respect of which the tax is chargeable; or

b) he disposes of or parts with any fund or money belonging to the person whom he represents which is in his possession or comes to him after the tax, additional tax, penalty or interest has become payable, if such tax, additional tax, penalty or interest could legally have been paid from or out of such fund or money.

Clause 9 is just plain and simply bad news for members, shareholders, directors etc. The message is clear - pay your taxes!!
And pay attention to how your financial arrangements are structured.

EDIT: Being a company director comes with a host of liabilities nowadays.

[duncan drennan]

Okay, thanks - lights are going on now. I clearly read it too late last night