Barter trade accounting

[Dave A]

The following high profile case highlights the dangers of taking accounting short cuts on barter trades and off-sets.

Former national cricketer Garth le Roux and companies under his control never paid a cent of tax on property-sale commissions totalling just over R1,9-million, Cape Town's Wynberg Regional Court heard on Wednesday.

Le Roux and his accountant, Deon van Heerden, have pleaded not guilty to 48 counts of income-tax and VAT fraud. Le Roux alone faces a further charge of contravening exchange-control regulations.

Le Roux's company, Garth le Roux Marketime, which is also listed as an accused, became entitled to the commissions when he acted as agent for the sale of properties at the prestigious Fancourt golf estate outside George.

However, the money was never paid to Marketime. Instead, Fancourt gave equivalent discounts on the purchase of other properties on the estate to two other companies of which Le Roux was a director.

His defence team has argued that the money never actually accrued to Marketime in terms of the Income Tax Act, and that Marketime was therefore never liable to pay tax on it, or alternatively that if this approach was wrong, it was an honest mistake.

However, Hendry said on Wednesday that Marketime would not have been able to give the money away if it did not have it, or an unconditional right to it, in the first place.

She said there was no evidence before the court that the transactions, which involved three separate amounts of commission, were a mistake.

The court also had to have regard to the fact that giving away the benefit to the other companies made no commercial sense, and that Le Roux was at all stages the alter ego of all the entities involved.

None of the three commissions were ever declared as income by any of the companies, nor was VAT paid over. "They vanished for tax purposes," Hendry said.
extracts from M&G article here

What is involved here is a transfer of value. An income was generated in one trading entity, and the benefit was transferred to another. There is no problem in that - as long as the transactions are reflected in the books of the entities involved.

[RKS Computer Solutions]

Is this a clear case of some high-strung celebrity thinking they won't be taken on? Or was this a dishonorable mistake by his accountant?

Reason I call it dishonorable, is because surely his accountant should have known about all the transactions and would have had to have listed in their reports...

[Dave A]

I gently debated even raising the issue here now because essentially it is still subjudice. So let's leave it to the courts to decide on the related intent and responsibility issues.

In reading it though, a thought did come to mind. From time to time a developer will sell off much of a development, but hold on to a unit or more for themselves to play with down the line. I don't know how that has been dealt with in the books, but I suspect this is a bit of a warning shot that SARS might have their own views as to how it should be done.