How Can I Decrease my VAT Bill to SARS?
/We have people asking us this question so often and the quick and simple answer is only through legal avenues (because the alternative it isn’t worth it) and keeping proper accounting records. The reality is all businesses struggle with paying their VAT bill and it hits hard on business cash flow.
The first thing to do, is accept that you are VAT registered and make sure you maintain proper accounting records to substantiate your VAT inputs and also your outputs. If your turnover is over one million rand in a 12 month period, you have no choice but to be registered, so make sure that you can claim the best possible inputs to reduce cash outflows.
There are various ways to ensure your VAT bill is accurate and you are not paying more than is required.
Get a proper accounting system that keeps records of all your business transactions. We love working with Xero because you can link all your business bank accounts to the software, and you are able to import all business transactions. Xero also links to various other tools that makes it easier to keep your records accurate and up to date.
Use data extraction tools like ReceiptBank and Hubdoc’s to link/attach all supporting documents to the transaction through the bank. You can also bring in all transactions that were paid through directors’ monies or cash and the supporting documents are easy to inspect if SARS requires you to submit them.
Maintain and process your accounting records regularly and calculate what your VAT bill will be sooner rather than later. If you know what you need to pay, it is easier to plan your business dealings and ensure you have the cash to pay your bill.
Avoid mistakes by following step 1! because getting penalties on incorrect VAT inputs is a terrible thing, it’s unnecessary and makes everyone cranky and cross!
If you have complex transactions or have imports and exports, ensure that your account for these transactions accurately to ensure you get the best VAT benefit.
Make sure transactions are accounted for in the correct transaction period. The VAT Act states that VAT should be paid or claimed on the earlier of either cash flow or invoice date. If you are waiting for a VAT invoice to pay a supplier and you know your VAT return is coming due, make sure that the payment is made, or the invoice is dated in the correct period. This will only delay/rollover a VAT amount, but it can possibly help with cashflow. Just ensure it is done correctly and legally.
VAT is the one tax that SARS knows people take chances on and they have very cool ways of picking up VAT201 returns submitted with errors. They take a very, very dim view of offenses that they believe were done on purpose.
So, let’s get the basics right and ensure your accounting records are a true reflection of your business; it’s highly probable that this could be the answer to managing your business’ VAT bill going forward.
