Employees’ Tax Review

Employees’ Tax Review

  • Do you want to avoid the financial implications of a visit from SARS?
  • We can provide you with a payroll review and opportunity to correct any irregularities in advance.

With the South African Revenue Services being put under increasing pressure by central Government to collect more money we have seen a dramatic increase in the compliance audits being conducted. These audits are very focussed, with the auditors spending less than a day investigating legislative compliance in the following specific areas:

The tax treatment of company vehicles provided to employees, with particular attention paid to:

  • Identification of the vehicles on the asset register and the determination of which employees have the right of use of such vehicles.
  • The correct calculation of the company car fringe benefit.

The allocation of travel allowances to employees, with particular attention paid to:

  • The company’s policy regarding the allocation of travel allowances (who receives them).
  • The formula used to determine the value of travel allowances allocated to employees.
  • Determining whether travel allowances had been taxed after taking into account the employees travel requirements.
  • Review of the employment contract to establish whether the travel allowance allocated is correctly described therein.

Identification of potentially untaxed benefits given to employees, with specific focus on:

  • ‘Employee of the Month’ awards.
  • Rewards for achieving performance targets.
  • Services provided to employees free of charge.
  • Employees receiving company assets for no value or at less than market value.
  • Payment of rent or ‘home office’ allowances off payroll.
  • ‘Unapproved’ risk benefits paid to assurers on behalf of employees.

SARS has also stepped up the introduction of new legislation and issued clarifying statements in the form of Interpretation Notes.

These Interpretation Notes cover issues such as:

  • Long service awards
  • Company cars (vehicles acquired via an operating lease or rental)
  • Taxation of employees earning multiple salaries
  • Tips paid to employees
  • Bursaries awarded to relatives of employees
  • Valuation of the company car fringe benefit

Many of these issues are being targeted in the audits to establish whether organisations are correctly applying the legislation.

It is clear from our interaction with clients that many of them are incorrectly applying these new Interpretation Notes. Whilst many organisations outsource their payroll for the comfort of knowing that it is managed in a legislatively compliance manner, the reality is that the service provider can only ensure legislative compliance if they are aware of all of the facts surrounding payments to employees. The challenge here is that most employers do not have the technical knowledge or time to unpack such issues and as a consequence legislative non-compliance is common.

HRTorQue Outsourcing is well placed to fill this gap. The approach used is to unpack the various issues with the client through a process known as an ’employees’ tax review’. This review takes a maximum of 3 hours at the client’s premises and includes a review of:

  • The payslips
  • Contracts / letters of appointment
  • Rules of any benefit funds

The findings of this review are presented in a practical manner via an easy to understand report presented to the management team.

If you would like further information on this process or would like to have such a review undertaken in your organisation kindly contact Dave Beattie on either 031 582 7410 or [email protected]. A quote will be prepared for all enquiries, with the price of the review being dictated by the size of the entity and scope of the review.