Hi All,

My cousin is a sole proprietor, but is not registered as a provisional tax payer.

He has a client who pays him monthly and deducts PAYE and UIF, paying him a net salary.

How would this be recorded in his books?

He issues the client with an invoice, who then pays him and issues him with a payslip.

I was thinking the deductions would go into a Prepaid Liabilities account (for SARS), and then this would be set off against what SARS says he owes at the end of the tax year. But then how to record?

For instance, Gross Pay = R 10,000.00 pm, PAYE = R 675.00 and UIF (employee's contribution only) = R 100.00.

So, invoicing a debtor (ultimately, his "employer") would go like this....

DR ABC Ltd (the invoice to the 'debtor') R 10,000.00


When payment is received (his net pay), then as follows:

DR Bank R 9,225.00
CR ABC Ltd R 9,225.00

DR SARS Control (Prepaid Liability) --> R 675.00 (PAYE)
--> R 100.00 (UIF)
CR ABC Ltd (the balance remaining in the debtor's account) --> R 675.00 (PAYE)
--> R 100.00 (UIF)

So, essentially, it looks like an asset sitting in his balance sheet.

At year-end, one would then calculate his PAYE and UIF on net profit?

This would then go to the SARS Control account, and the difference would be what he would have to pay SARS, not so?

If he'd received the same pay for the full 12 months, then there would be R 8,100.00 PAYE and R 1,200.00 UIF sitting in the SARS Control account as a prepaid liability.

So, say for instance he owes SARS R 9,000.00 PAYE and R 1,500.00 UIF at year-end, it would mean he'd have to pay over R 900.00 PAYE and R 300.00 UIF.

How do we record this then?

Payroll deductions are not deductible expenses, as far as I understand. So what is the double-entry for the final balancing payment?

Thanks in advance - I have Really been struggling to find an answer to this one!!!