The latest is that the South African Revenue Service (SARS), in their wisdom, have decided to turn the thumbscrews a bit on provisional tax payers.

They now want accurate estimates (though that seems to me to be a bit of an oxymoron), failing which penalties (and quite heavy ones at that) will be levied on any differences between this estimate and the final assessed amount.

This can be very difficult, especially if you have income from a variety of sources and you’re waiting for audits and final accounts to be completed.

The key aspects of this new rule are:

• Make sure your estimate is as accurate as possible!
• You must pay provisional tax on at least 80% of your eventual taxable income.
• If you don’t, SARS can penalise you by charging additional tax equal to 20% of the difference in tax, and this is calculated at the rate which applies to the 80% estimate.

What to do about it:

1. Make sure you (or your accountant) keeps all the documentation (as evidence) used to do the estimate, so if you have to, you can prove the calculation was genuine. If SARS asks you to justify the estimate and it isn’t satisfied with the response, it could even increase the estimate! What’s worse, in this event, is that the estimate becomes final and you can’t even challenge it.
2. If SARS levies a penalty, you can object to it, but in the absence of sound evidence, the objection could be rejected. Make sure the objection is prepared by a tax specialist – it could save you a lot of time and money!