PAYE for businesses

[Morticia]

Also, both the IRP6 (provisional tax) and IT14 (tax return) provide specifically for PAYE deductions, so as long as you get IRP5, you're o.k. (apart from the timing of the cash-flow implications, obviously)

Strictly speaking the onus is on your client to ascertain your true status and not the other way round. However, to avoid the whole thing, you need to advise the client in writing of the following (if applicable of course):

1 - you do not receive more than 80% of your income from one specific client
2 - you employ 3 or more full-time employees and they are engaged on a full-time basis in the business of your company (i.e. not "moonlighting" for you)
3 - your employees are not relatives/connected persons/shareholders/members etc to you or your company.
4 - although your duties are (presumably?) performed at the premises of your client, they have no control/supervision as to the manner of how you perform your duties.

[Chatmaster]

I am at this point going to cancel our agreement with the college that refuses to stop deducting the PAYE. The reason is simple. The PAYE are deducted on our employee's name and it is assumed that he earns the invoiced amount as a salary. Obviously the deducted amount are much more than he is getting paid as the invoiced amount actually is supposed to go to the CC. This means that the CC looses constantly, and we are therefore working at a straight loss. At this point this is causing much more drama for me than it is worth. Not to mention the fact that there are more than 10k outstanding on their account on my side. So my attorneys will have to send them a final warning and if they still persist I will have to make a personal visit. This is getting most irritating.

[Dave A]

I am at this point going to cancel our agreement with the college that refuses to stop deducting the PAYE. The reason is simple. The PAYE are deducted on our employee's name...

This is where my "foul play" sensors start twitching. You might need to enforce your contract.

What you are going to have to watch for is the training company approaching your employee directly (or vice versa). It seems they have his personal information already...

[Morticia]

I am a bit perturbed - how are they able to pay your employee, i.e. where did they obtain his/her personal details, ID no, bank account details (they do EFT?), letter of employment/service contract? What paperwork is in place on their side? By implication your employee is actually deemed to be their employee, so does he have access to employee benefits (UIF, pension, medical aid).

[Chatmaster]

When he went there the first time they made him fill in a facilitators agreement, which contained all this information. The invoice is made out by my CC and paid EFT into the CC's bank account, minus 35% "PAYE" deduction. He is not a shareholder/member but a contractor to my company.

[Morticia]

Perhaps the facilitator's agreement was completed incorrectly? But it really sounds as if your client has the wrong end of the stick and is acting on half-truths received from an ignoramus?? Nothing as dangerous as that!!

[Morticia]

http://www.sars.gov.za/home.asp?pid=333

Interpretation Note 35 (Issue 3) dated 30/3/2009 - useful insight into discussion

[Ladel]

Hi

Just my 2c worth, I had exactly the same situation with one of my clients, the owners of a cc. They do the the graphic designing for another international and reputable co and a few years ago they also almost had a heart attack when this company started deducting PAYE. Fortunately this company was a bit more spesific and they told my client that they were instructed to do so by their auditors, one of the big five, as they deemed my client as a personal service company. Basically I did a letter explaining why my client was in fact not a psp and all was thankfully resolved, so I'm happy to confirm that I stand 100% behind Morticia's comments...

Also, both the IRP6 (provisional tax) and IT14 (tax return) provide specifically for PAYE deductions, so as long as you get IRP5, you're o.k. (apart from the timing of the cash-flow implications, obviously)

Strictly speaking the onus is on your client to ascertain your true status and not the other way round. However, to avoid the whole thing, you need to advise the client in writing of the following (if applicable of course):

1 - you do not receive more than 80% of your income from one specific client
2 - you employ 3 or more full-time employees and they are engaged on a full-time basis in the business of your company (i.e. not "moonlighting" for you)
3 - your employees are not relatives/connected persons/shareholders/members etc to you or your company.
4 - although your duties are (presumably?) performed at the premises of your client, they have no control/supervision as to the manner of how you perform your duties.