PAYE for businesses

[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

[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

[Chatmaster]

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

Yvonne

No way that will happen, they will pay that is a promise, I have yet to find someone that doesn't find me as very persuasive

[Morticia]

I have a sneaky suspicion that your client is defining you as a Personal Service Provider, in which case you are liable for PAYE, irrespective of the fact that you are trading as a CC. There are new regulations applicable from 1/3/2009.

Before I go off on a tangent, perhaps you could check with your client if this is the case and then I can provide more detailed feedback.

[Chatmaster]

Morticia, you've got me there. In terms of logical sense, how on earth can a CC or Pty pay PAYE? Please help me understand.

I have finally spoken to the one company's financial manager which agreed that this was not supposed to happen and the problem is now solved with them. However, the other one is clearly still stuck to the idea of deducting PAYE. The irony is that this specific company I haven't done any work for personally but one of the trainers employed by company did work them. I am most frustrated.

[Dave A]

You just attach the IRP5 to your tax return. Really messes up provisional tax calculations, though. And with that, cash flow.

If these training companies are regularly outsourcing for trainers, you could easily find they've been slapped for not doing this deduction before. However, from a procedure point of view, they really should clearly establish the position of each trainer before they make the call to deduct PAYE.

Whatever, the bottom line is if they deduct PAYE they have to issue an IRP5. And the PAYE paid over will be credited as part of the income tax paid by your CC. You'll get the change in a tax refund in due course.

[Morticia]

A PSP (personal service provider) exists if:
- service is provided by a company or a trust - NOT an individual
- the service is provided via a person who is connected to the co/cc.
- the psp does not have at least 3 full-time employees who are not shareholders, members, beneficiaries or connected persons.

The requirement/possibility of a co/cc having PAYE deducted etc has been around for a number of years (cannot remember exact date..old age) and was specifically legislated to curb the abuse of taxpayers by resigning from their job, forming a co/cc, get re-employed by the same employer as "independent contractor" and claiming a myriad of fictitious expenses, avoiding monthly PAYE as employee, etc.

Yes, you must insist on getting an IRP5 certificate if a supplier insisted on deducting PAYE and you will get credit for this on final assessment. You may also deduct any PAYE deductions when calculating a provisional tax payment.