VAT (VALUE ADDED TAX) – VERY VERY IMPORTANT FOR COMPANY OWNERS

It had been a while since I have been contemplating to write about this tax, its been so worrying to me as I watch a lot of company owners losing their business because of mismanaging this tax.You hear of stories of people owing SARS millions of rands and VAT has been the major culprit.

There are 2 ways of registering for VAT:

Mandatory registration

If the total value of taxable supplies made in any consecutive twelve-month period exceeded or is likely to exceed R 1 million (according to SARS)

Voluntary registration

If the value of taxable supplies made or to be made is less than R 1 million, but has exceeded R 50 000 in the past period of 12 months (according to SARS)

A lot of people have fallen into the voluntary registration but without knowing the implications of this registration, a lot are in serious trouble with their returns as well as debt.

I have refused to register this tax to a lot of my clients without having a satisfactory reason for registration because I do not want them to register just for the sake of it then end up in serious trouble. Having a VAT number does not guarantee you WORK.

What’s my take on this?

  • Do not register VAT for the sake of registering especially on the voluntary option, have a valid reason for registering for example you have been given a contract and they need a VAT number.
  • If you are registered for this tax understand exactly what it means, the record keeping required, the VAT cycle, payments etc. VAT is not your money, you are collecting it on behalf of SARS so please don’t include it as the business money, yours is the money you charge before VAT, I encourage my clients to open an account just to deposit the VAT amount every time they make a sale, so that when time to pay VAT comes the money is there.
  • You definitely need an accountant to be doing your bookkeeping every month so that your returns are done on time usually bi-monthly. Teach yourself to declare and pay immediately within the timelines to avoid penalties and interest.
  • Learn how to file your receipts and any supporting documents you need, please bother your accountant if need be so that you go through this tax thoroughly and understand it. IT IS STILL YOUR RESPONSIBILITY, at Ngoho Accounting we never register a client voluntary without making sure they understand all the implications. It is so sad to see someone drowning in debt because of this tax
  • RUN AWAY FROM FRAUDULENT BOOKKEEPERS OR ACCOUNTANTS. As much as business people hate to pay tax, and end up doing returns fraudulently, IT IS ONLY ONE DAY when you will realise that it wasn’t worth it anyway when you lose everything you have worked so hard for. I am not trying to frighten anyone but have seen it happening.
  • Do all your returns as they come due and pay the dues. One thing that can give you peace of mind as a business owner is being compliant, all returns up to date and all payments up to date. It makes me smile when all my clients are compliant. It is so easy to be always compliant, you can ask me how, and I will gladly offer you a few minutes for free.

Conclusion

It is not bad to be VAT registered BUT know your obligations clearly and ALWAYS do the right thing.

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