Be Ready for a SARS Lifestyle Audit 

Being suddenly subjected to a SARS “Lifestyle Audit” is a nerve wracking business with the risk of penalties of up to 200%, backdated interest, and criminal prosecution.  

What external sources of information does SARS have access to? How does SARS select targets for lifestyle audit? If you are unlucky enough to be selected, what will happen and how can you be prepared? Can you refuse to co-operate and/or demand access to information from SARS before complying? 

We address those questions and discuss a High Court decision in which an individual faced the imprisonment for failing to answer a lifestyle questionnaire.  

We read about Eskom staff having to undergo lifestyle audits so that corruption can be identified and stamped out.  

SARS have been conducting lifestyle audits since 2007. These audits are conducted when SARS suspects that the taxpayer is not declaring all his or her income and thus is underpaying tax due. 

SARS have access to many sources of information  

Data can be accessed from: 

  • Your banks 
  • The Deeds Office for property transactions 
  • Financial institutions for mortgage loans or motor vehicle finance 
  • Vehicle registrations 
  • Social and other media where your lifestyle can be ascertained 
  • Perhaps most significantly jealous neighbours or “friends” who tip off SARS that your lifestyle exceeds the purported income you earn (SARS actively encourage people to tip them off when they think people they know are living beyond their means).  

How do SARS select people for lifestyle audits?  

SARS does not disclose the criteria it uses to start probing taxpayer’s affairs or how it selects those who have to complete a lifestyle audit. If you are selected, you have to complete the audit in the time set out by SARS.  

One individual selected demanded to know the reasons why he was picked, and refused to complete the 26 page “lifestyle questionnaire” sent to him by SARS (seemingly after a ‘third party’ tip off). He had never registered as a taxpayer, nor had he ever submitted tax returns. The matter went to the High Court which rejected the individual’s right to demand “SARS confidential information” and ordered him to provide the information required by SARS, on pain of committal to prison for contempt of court until he submitted the lifestyle questionnaire. 

What to expect if you are selected 

You will need to provide details of day to day living expenses including rent or bond payments, groceries, entertainment, vehicle expenses, holidays – in fact every item of cost you and people related to you incur. These will be reconciled to bank statements. In addition, SARS will probe all sources of your income. 

In doing this process SARS can request information going back five years. If you don’t have the necessary documentation to justify income or expenditure, then SARS can levy taxes on these amounts. Keep good records 

It pays to be honest and as thorough as possible when completing this process. As noted above SARS have many sources of information to check the data provided by you. 

The bad news 

If a taxpayer has been under-declaring income or cannot justify expenses that have been claimed, then SARS will issue assessments for these amounts. Penalties of up to 200%, plus interest may be levied by SARS who can also report the taxpayer to the National Prosecuting Authority for potential criminal proceedings. The only bit of good news is that SARS do not use search and seizure operations when conducting lifestyle audits – these are for criminal cases that SARS pursues. 

Lifestyle audits are nerve racking and risky for taxpayers. Keep good records and consult your accountant before submitting information to SARS.  

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Tips for Managing your Staff Working from Home  

One of our new realities in this topsy-turvy world of global crisis is the many businesses that have had to close their offices and work remotely.

The resultant explosion in the number of people working from their home environments brings with it many serious challenges for businesses. Fortunately however there is a lot of guidance available on how to maintain high levels of morale, loyalty and productivity amongst your work-from-home employees.

For example, researchers at Harvard University have identified five main areas as key to achieving the best possible results from a remote working situation. Read on for some thoughts on them…

In this brave new world of COVID-19, many people are working from home. Even after there is a cure for the virus, this trend will likely continue.

Researchers at Harvard University have come up with some good ways to ensure you get maximum productivity and loyalty from your employees working remotely.

Key points

  1. Both managers and staff miss face to face meetings – managers worry how effectively their people are working and employees miss the support and guidance they get from managers.

Managers should introduce structure and discipline into their interactions with their staff – setting up a time each day (or whatever is needed) to connect to each other and, possibly, the team the employee is in. This can cover all the employee’s and team’s work requirements, bringing them up to date with events in the company. Not only does this improve productivity but it increases staff morale and loyalty.

  1. Access to information can become difficult between staff members – for example, a relatively new employee asks a staff member for information who initially ignores the request until the new staff person starts sending out more aggressive emails.

Managers need to be aware of this type of conflict and focus on new employees to iron out any potential difficulties.

  1. Employees get lonely and can over time feel they’ve been cut adrift which is bad for their stress levels and can lead to a drop in productivity.

If managers don’t have good listening skills and empathy, then they need to add these to their armoury and be on the lookout for loneliness manifesting in people who report to them. In the initial stages, it may pay to also have Human Resources contact employees working remotely.

  1. Home distractions. Working from home can lead to distractions of members of staff by spouses and family.

The company needs to ensure that the employee has the required technology and IT security in his or her home. Having a separate office in their homes is also important.

  1. Staff need time to catch up with their colleagues’ personal lives and the manager should allow time for this when there are video calls. This will reinforce that employees belong to and are part of a team.

There is much to learn in terms of skills and keeping staff morale and productivity at high levels, when employees work from home.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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COVID-19 and Directors: Your Duties and Liabilities in the Coronavirus Crisis

Your focus as a director right now will no doubt be on keeping your business afloat through these trying times. 

Don’t lose sight however of the fact that the onerous obligations and duties placed on all directors by the Companies Act still apply. Failure to live up to the required standards exposes you not only to a significant risk of personal liability for company debt, but also to criminal prosecution. 

We recap in summary what the Act requires of you, we discuss the impact of King IV on your risk profile, and we end off with a caution on the extent to which you can rely on indemnity insurance for cover. 

There are significant obligations placed on directors by the Companies Act and personal and criminal liabilities if they fail to meet these obligations. 

As a director you will no doubt be focusing on critical issues like keeping your business afloat and solvent (the CIPC has waived its right to intervene when a company becomes temporarily insolvent due to the lockdown and other restrictions imposed. This concession will be withdrawn 60 days after the lifting of the National Disaster regulations)don’t forget that the Companies Act is still in force. 

The coronavirus has created an unprecedented situation which demands swift, decisive action by directors – for example, the President only gave the country 72 hours’ notice before the lockdown came into effect, which gave little time for directors to react to the new reality. 

No change in your duties or liabilities 

Despite the coronavirus there is no change to the duties or liabilities of directors. They must perform their role: 

  • in good faith,  
  • in the best interests of the company 
  • with the degree of care, skill and diligence that may reasonably be expected of a person  

(i) carrying out the same functions in relation to the company as those carried out by that director; and  

(ii) having the general knowledge, skill and experience of that director. 

Good faith”, “best interests” and “care, skill and diligence” are onerous terms. For a director to be protected against falling foul of these provisions that director needs to show that he/she took diligent steps to be informed of the issue and made a rational decision in the best interests of the company. This is known as the Business Judgment Rule and courts look to this when considering a director’s personal liability. 

The impact of the King IV Report   

When considering the Business Judgment Rule, the courts have relied on whether a director followed the King IV Code of Good Governance when reaching their decision.  

One issue that will arise with the coronavirus is that King IV mandates that a company be a good corporate citizen and part of this is to look after the health and safety of employees (following the requirements of the Occupational Health and Safety Act and now government’s Disaster Management Act Regulations– for example, were adequate steps taken in terms of the National State of Disaster declared by the President such as social distancing (working from home where feasible) and  ensuring employees had access to masks, hand sanitisers and so on at work?  

Failure to comply with King IV in this scenario means directors will not be able to rely on the Business Judgment Rule and can be held personally liable for losses incurred. 

Will your indemnity insurance cover you? 

Directors can take out indemnity insurance, covering claims awarded, in their personal capacity, when they commit “wrongful acts”. However, the insurance will not apply if there is “wilful misconduct or wilful breach of trust” by the director (check your policy’s exact wording). An example might be the director being convicted under the Occupational Health and Safety Act.  

As a director you could find yourself being held personally liable for your decisions and being denied access to your indemnity insurance cover. 

Dealing with the pandemic increases the pressure on directors but doesn’t absolve them of their liabilities. 

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Logista Gerat vir die Toekoms 

Promosie 

Jacques Coetzee, besturende direkteur van Logista, en Heinrich Regenass, direkteur, die bestuurspan by Logista is gerat vir die veranderinge wat die vierde industriele revolusie meebring. (Foto: Jeanie de Klerk/Verskaf.) 

Die vierde industriële revolusie (4IR) bring baie veranderinge mee. Sommige bedrywe soos die finansiële bedryf, kan heeltemal vernuwe word en baie beroepe wat ons vandag nog ken, sal wegval terwyl nuwe geleenthede weer geskep sal word. 

Die bestuur van Logista, ’n suksesvolle ouditeursfirma in Pretoria-Oos, is egter nie bekommerd oor die veranderinge wat dié nuwe era inhou nie. 

“Ons maak gereed vir die behoeftes van die volgende generasie,” sê Heinrich Regenass. Hy is tans die besturende direkteur van Logista, maar gee binnekort die leisels oor aan Jacques Coetzee wat tans een van die direkteure is. 

“Dit is tyd om plek te maak vir iemand met vars nuwe idees.” 

Regenass meen dié besluit is nie ligtelik gemaak nie. 

“Ons is reeds vir meer as twee jaar besig met opvolgbeplanning en het vir Jacques stelselmatig voorberei om sy pos vol te staan as nuwe besturende direkteur.” Hy glo die besluit demonstreer die firma se toegewydheid aan innovasie en verandering. “Ons wil uiteindelik ’n firma ontwikkel wat steeds in die toekoms relevant is, daarom is ’n goeie opvolgplan deel van ons strategie om as firma volhoubaar te bly.” 

Heinrich Regenass, voormalige bestuurende direkteur van Logista is reg om bietjie meer gholf te speel en fiets te ry, alhoewel hy steeds nou betrokke by die firma gaan wees. (Foto: Jeanie de Klerk/Verskaf.) 

Coetzee prys Regenass vir sy bydrae tot die firma se sukses. 

“Hy is ’n baie goeie leier en het die firma reeds so geposisioneer dat ons die besigheid, gegrond op integriteit en vertroue, verder kan bou.” 

Regenass gaan gelukkig nie die firma verlaat nie, en bly steeds aan as ’n mentor vir Coetzee. 

“Ek sal seker so ’n bietjie meer gholf speel en fietsry, maar ek wil graag steeds deel wees van die firma en Coetzee verder bystaan.” Hy sal ook nog die bestaande lojale kliënte soos altyd met goeie raad bedien. 

Regenass en Coetzee is dit eens: hulle is nie bang vir die uitdagings wat die vierde revolusie inhou nie. 

“Die sleutel tot sukses is die vlak van aanpasbaarheid wat ’n besigheid kan handhaaf,” sê Regenass. “Ons wil deel wees van die era waar tegnologie ’n groter rol speel. Ek glo mense se vaardighede gaan altyd nodig wees om stelsels doeltreffend te bestuur – dit is die insameling van inligting en bestuur van data wat belangriker gaan word, maar syfers en data beteken niks as ’n kundige dit nie kan ontleed nie.” 

Regenass glo Coetzee se internasionale ondervinding in die bedryf sal handig te pas kom in sy nuwe pos. 

“Dit is vir ons belangrik aangesien Logista reeds ’n lid is van BKR International, ’n wêreldwye organisasie van onafhanklike rekeningkundiges en besigheidsadviseurs. Ons wil ook graag ons mark verder uitbrei en ons vlerke sprei.” 

Die firma is bekend vir die persoonlike aandag wat hul kliënte ontvang en die hoë gehalte professionele dienste wat hulle aanbied. Logista het oor die jare ’n aanpasbare struktuur van gespesialiseerde kennis saamgestel wat dit maklik maak vir hulle om kliënte se spesifieke behoeftes te vervul. 

Die organisasie het in twee dekades soveel gegroei dat hulle tans een van die markleiers in die bedryf is en hulle spog met ʼn lang lys van tevrede kliënte in verskeie sektore. Logista se bestuursmodel bestaan uit sewe direkteure wat deur sowat sestig tegniese, en administratiewe personeel ondersteun word. 

Jacques Coetzee, nuwe besturende direkteur van Logista, sien uit daarna om die firma na nuwe hoogtes te neem. (Foto: Jeanie de Klerk/Verskaf.) 

Coetzee sien uit daarna om Regenass se skoene vol te staan. 

“Ek wil graag voortbou op dit wat hy reeds tot stand gebring het. Ons wil graag markleiers bly en steeds aanpas by die besigheidswêreld wat so vinnig verander. Met al die nuwe verwikkelinge kom nuwe uitdagings, maar ook nuwe geleenthede. Ons is voortdurend op soek na maniere om die uitdagings in geleenthede te omskep. Ek is bly om steeds te kan leer by een van die bestes. Iemand wat uit die boks kan dink en nie bang is om te innoveer nie.” 

Coetzee is oortuig daarvan dat Logista vir die toekoms gerat is. “Ons gaan nog lank hier wees.” 

Logista great for the future 

Promotion 

The Fourth Industrial Revolution (4IR) brings with it many changes. Some industries, like the financial industry, can be completely renewed and many careers we still know today will fall away as new opportunities are again created. 

However, the management of Logista, a successful auditing firm in Pretoria East, are not worried about the changes that this new era will bring. 

“We are gearing up for the needs of the next generation,” says Heinrich Regenass. He is currently Managing Director of Logista, but will soon give over to Jacques Coetzee, who is currently one of the directors. 

“It’s time to make room for someone with fresh, new ideas.”  

Regenass said the decision was not made lightly. 

“We have been doing succession planning for more than two years and have systematically been preparing Jacques for his position as the new managing director.” He believes the decision demonstrates the firm’s commitment to innovation and change. “We ultimately want to develop a firm that is still relevant in the future. That is why a good succession plan is part of our strategy to remain sustainable as a firm.” 

Coetzee praises Regenass for his contribution to the firm’s success. 

“He is a very good leader and has already positioned the firm so that we can continue to build the business, based on integrity and trust.” 

Fortunately, Regenass will not leave the firm and will continue as a mentor for Coetzee. 

“I will probably play a little more golf and cycle more, but I still want to be part of the firm and continue to assist Coetzee.” He will also continue to provide existing loyal clients with sound advice. 

Regenass and Coetzee agree: they are not afraid of the challenges of the Fourth Revolution. 

“The key to success is the level of adaptability a business can maintain,” says Regenass. “We want to be part of the era where technology is playing a bigger role. I believe people’s skills will always be needed to manage systems effectively – it’s the collection of information and data management that will become more important, but figures and data mean nothing if an expert can’t analyse it.” 

Regenass believes Coetzee’s international industry experience will come in handy in his new position. 

“This is important to us, seeing as Logista is already a member of BKR International, a global organisation of independent accountants and business advisors. We also want to expand our market further and spread our wings. ” 

The firm is known for the personal attention their clients receive and the high-quality professional services they offer. Over the years, Logista has put together a customisable structure of specialised knowledge that makes it easy for them to meet customer-specific needs. 

The organisation has grown so much in two decades that they are currently one of the market leaders in the industry and boast a long list of satisfied customers in various sectors. Logista’s management model consists of seven directors supported by around sixty technical and administrative staff. 

Coetzee looks forward to filling Regenass’s shoes. 

“I would like to build on what he has already achieved. We want to remain market leaders and continue to adapt to the rapidly changing business world. With all the new developments come new challenges, but also new opportunities. We are constantly looking for ways to turn the challenges into opportunities. I am happy to continue to learn from one of the best, someone who can think outside of the box and is not afraid to innovate. ” 

Coetzee is convinced that Logista is geared for the future. “We’re going to be here for a long time.” 

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Businesses: How to Survive the Coronavirus Panic

No one knows for certain just how serious the eventual economic fallout from the COVID-19 coronavirus pandemic will be, but at the very least businesses will face their most challenging times since 2008. Quite possibly it will be a lot worse.

For the moment you will want to concentrate on business survival, to which end we share some practical ideas on how you can respond to the crisis.

Businesses that react calmly and sensibly in this time of panic won’t just maximise their chances of survival; they could even end up strengthening their position in readiness for the inevitable recovery and upturn…

Never let a good crisis go to waste” (Winston Churchill)

Globally, the COVID-19 coronavirus has spread panic amongst societies and markets. Businesses are suffering their most challenging times since the 2008 Global Financial Crisis.

This is the time for urgently reviewing how events have affected your business and how you can respond to the seeming chaos.

Cash is king

When faced with great uncertainty, conserve cash and shore up all your credit lines. This will give you greater flexibility when strategizing a response to the coronavirus. You may, for example, be able to buy a crucial stock item for a discount from one of your suppliers, thus ensuring that you can continue operating. Apart from strengthening your position with your competitors, this could help the supplier to remain in business – relationships are important, and this supplier will be grateful to you.

Trim costs wherever you can – some of this is being done for you as many companies are cancelling travel, resulting in many meetings and conferences being called off. Capital expenditure is being pruned globally and there may be opportunities to delay some of your current capex.

Keep your staff healthy

Apple has already told staff to work from home to reduce the risk of catching or spreading the coronavirus. Desks are being spaced to reduce the possibility of catching the virus and meetings are being cancelled or are taking place electronically.

Make sure the risk of staff catching the virus is minimised and have a succession plan if some key members are incapacitated by the coronavirus. Take particular care of staff members who have health issues, as they could become seriously ill or die if they catch the virus. As health authorities are advising people to frequently wash their hands, ensure that you have enough hand washing dispensers.

As many of your staff will be working from home using smart phones and their own desktops, have your IT department mitigate the risks of hacking or computer viruses getting into your IT platform.

Perhaps, most importantly, communicate often with your employees and managers. Regularly follow updates from the World Health Organisation and the local Department of Health. This is a time of uncertainty, as there is no definitive knowledge on how the coronavirus will evolve and thus sharing the information you gather on the disease, will improve the health and morale of staff in your business.

The Occupational Health and Safety Act imposes obligations on employers to provide a healthy environment for their staff. Much of the above is in line with ensuring that you comply with that Act’s requirements, but you need to ensure your organisation is compliant with the legislation.

Your supply chain

This is clearly a key area and working out the risks of suppliers and contractors being unable to supply you is a key task. Some of the important areas will be changing your safety stock holdings, reviewing your contracts with stakeholders and assessing the risks and the consequences of default. This is where it really pays to have cash.

As we said above, keep in mind the long term relationships with suppliers.

You also need to review your insurance policies – will they pay out if certain scenarios unfold? Do you need to take out different policies?

Reacting, planning and preparing strategies will ensure you have the agility to ride out this crisis and may even strengthen your position with competitors.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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COVID-19 Lockdown: Relief Programs for Businesses and SMMEs

The National Lockdown, due to end on 16 April, presents businesses of all sizes with an unprecedented set of existential challenges.

Of course sooner or later this crisis will end, but for now it is a case of survival for many businesses, and particularly for those smaller enterprises forced now to close for 21 days.

Don’t despair, help is at hand! We list the various relief initiatives announced to date. The list will change, as will the details of and processes for accessing each initiative, but be aware of, and take advantage of, the assistance that is out there – or will be out there shortly.

The President, telling the nation that “We will prioritise the lives and livelihoods of our people above all else, and will use all of the measures that are within our power to protect them from the economic consequences of this pandemic”, has announced a variety of initiatives to assist SMMEs (Small, Medium and Micro-Enterprises) that will need assistance in surviving the three week lockdown and economic disruptions flowing from the COVID-19 coronavirus.

Please note these are new initiatives, so expect delays, changes to schemes, new proposals and differing interpretations.  Everyone’s patience will be tested!

Some of the announced measures discussed below still need to be enacted and may be different when they are finalized.  Expect ongoing changes and keep Googling for ongoing lists of proposed and implemented avenues of business relief.

1st: UIF Money

The UIF has an estimated surplus of R180 billion and this is the logical first port of call when looking at incentives, especially as money given by the UIF is not a loan, and thus doesn’t have to be repaid. There are two routes to access this money – using the traditional UIF method (National Disaster Benefit) or making use of the new Temporary Employer/Employee Relief Scheme (TERS) which is discussed below.

For either method, the employer must be registered with the UIF and be making monthly contributions. If you are behind on contributions, you can pay in any backlog you have.

National Disaster Benefit

  1. Temporary shut down
    If the employer temporarily shuts down the business, then the UIF will pay out R3 500 per employee per month for up to three months.

    • Requirements:
      • A letter from the employer confirming the operation is temporarily closing down due to the coronavirus
      • A copy of the employee’s ID
    • Forms to be Completed:
      • UI19 and UI12.7 (employer to complete)
      • 1 – application form
      • 8 – Confirmation of bank account
  1. Reduced work time
    The payout is the difference between what the employer pays and UIF benefits.

    • Forms to be Completed:
      • UI19 and UI2.7 (completed by Employer)
      • UI 2.1 (application)
      • UI 2.8 (bank form completed by the bank)
      • A letter from the Employer confirming Reduced Work Time is due to the coronavirus
      • Copy of ID document
  1. Quarantine and illness
    In cases where employees are put in isolation for 14 days or more.

    • Requirements:
      • Letters from the employer and employee that the person is in quarantine. No medical certificate is needed
      • If the quarantine is longer than 14 days, a certificate is required from the employee’s doctor, along with the form UI3
    • Forms to be Completed:
      • UI19 and UI2.7 (completed by Employer)
      • 2 (a portion of which is completed by the Doctor)
      • UI 2.8 (bank form completed by the bank)
      • Copy of ID document
  1. Death benefits
    If the employee dies, the UIF will pay the funds to beneficiaries.

    • Forms to be Completed:
      • UI19 and UI 53 (completed by the Employer)
      • UI 2.5 or UI2.6 (deceased application)
      • Death Certificate
      • ID of deceased and applicant
      • UI 2.8 (bank form completed by the bank)
      • Copy of ID document

You can also download the UIF’s “Easy-Aid Guide for Employers” here.

Temporary Employee/Employer Relief Scheme (TERS)

This applies to businesses who temporarily shut down – a three-month period is envisioned but this could be extended. The UIF then pays salaries to all staff, based on the current UIF pay outs – a maximum of R6 731 p.m. for staff earning R17 162 or more down to the minimum wage of R3 500.

There is quite a bit of documentation here – send an email to Covid19ters@labour.gov.za and you will get the forms to be completed and other requirements needed.

A Memorandum of Agreement is signed and the employer submits (in the required format) a spreadsheet of employee details and salary, proof of payment of the last 3 months’ salaries, bank confirmation of the applicable bank account.

You will need to open a separate bank account for this and prove each month that all staff have been paid.

There is quite a bit of work here and getting the forms accurate will prevent delays in payment.

Which of the two schemes to choose from depends on your business – there is some crossover, for example, quarantined employees can claim under the National Disaster Benefit (see Quarantine and Illness). On the face of it, TERS looks more lucrative but it is very admin intensive in setting up, and as a new scheme it may be subject to teething problems. Ask your accountant for advice in doubt.

2nd: The Department of Small Business Development (DSBD)

R500 million has been set aside to help SMMEs due to the impact of the coronavirus. The money will be in the form of loans at prime less 5%. Assistance falls into two categories:

  • Business Growth/ Resilience Facility: This applies to businesses whose products are aligned to helping to combat the pandemic. Examples are making hand sanitisers, medical protective clothing, medical supplies etc. SMME logistics companies may also apply for funding.Funding will cover bridging finance, asset finance, stock and working capital needs.
  • Debt Relief Fund: Companies will need to show how the coronavirus has impacted on their business. The relief focuses on purchase of stock and other operating needs. Funds will be released based on the company’s cash flow requirements.

The starting point is to register on the DSBD’s portal (www.smmesa.gov.za) – the registration entails staff breakdown between males and females, the number of youth employees and racial classification of staff. There is also a section on who owns the business and annual turnover. The business needs to be 100% South African owned and the work force is to be 70% local.

The DSBD is setting up an SMME database which will be used in future interventions.

Once registered follow the application process which opens on 2 April. How much each business gets is still unclear.

Call the DSBD’s hotline 0860 663 7867 or email info@dsbd.gov.za to check what kind of government support you qualify for.

3rd: Department of Trade and Industry

R3 billion assistance has been set aside with a main focus on providing funding to “vulnerable” businesses and to provide financing help to companies involved in the battle to roll back the coronavirus. It’s not that dissimilar to the DSBD’s approach but it serves all business, not just SMMEs. Of the R3 billion, R500 million will be for importing needed medical products and R700 million will be for financing equipment and working capital requirements. Guidelines as to how to apply are forthcoming.

4th: The Solidarity Fund

This has been set up with R150 million from the government (www.solidarityfund.co.za) and it is designed to help stop and detect the virus, look after the people with it, plus help those people who are vulnerable as a result of the coronavirus. Mary Oppenheimer has pledged R1 billion to this fund and Naspers has committed R500 million.

You may wish to donate to the fund or apply for help for struggling staff members.

5th: Private and Corporate Funds

The Rupert and Oppenheimer families and the Motsepe Foundation, have each pledged R1 billion. Motsepe’s money will go towards helping poor communities fight the coronavirus by supplying them with hand sanitisers etc. The Ruperts’ and Oppenheimers’ funds will be to help struggling small businesses and employees, as a result of the coronavirus. In addition, Naspers has pledged R1.5 billion (in addition to the R500 million to the Solidarity Fund) to source medical supplies and protective equipment, from China, for health care workers.  .

The Rupert funds will be disbursed by Business Partners and application forms will soon be released – although details are not yet available, the money will be a loan.

The Oppenheimer money will be paid out from the “South Africa Future Trust” through the major four banks in the form of a five-year interest free loan – for details see SAFT’s website. SMMEs will apply to their bank which will then pay salaries directly into employees’ bank accounts. No liability will be incurred by employees – the business will be liable for repayment. Speak to your bank manager for how to apply – the system begins operating on 3 April.

Details on the Motsepe and Naspers disbursements are still outstanding.

6th: SARS Relief Measures

  • The Employment Tax Incentive (ETI) has been extended to include all staff earning less than R6 500 per month from ages 18 to 65 – they will qualify for an additional R500 per month which can be claimed via the monthly PAYE return.

All staff members currently receiving ETI benefits will get an additional R500 per month.

These measures will apply for four months from April to July this year. The ETI has been paying out twice a year but this will now be monthly.

  • Tax compliant companies with turnover of less than R50 million will be able to hold back 20% of their PAYE payments and a portion of their provisional tax payments, as follows:
    • The business must be tax compliant and using eFiling.
    • PAYE returns due May 7, June 7, July 7 and August 7, you only pay 80% of your PAYE liability
    • From September 7 and for the next five PAYE returns, the 20% reduction is to be paid back in equal amounts e.g. if you received a R30 000 reduction in PAYE for the months April to July, then you will repay an additional R5 000 each month on your PAYE return.
    • Provisional Tax payments due from April 1 to September 30:
      • The first payment at 15% of the estimated tax liability
      • The second payment at 65% of estimated tax liability (i.e. 50% is due on the second payment)
      • In your top up payment you will be required to pay your full tax liability.

Note: the above applies to companies – measures for individuals will be announced later.

7th: Competition Act amendments re banks and retail tenants

The Competition Act has been amended to allow banks to work together to come up with solutions to help indebted companies and people. The major banks have announced cash flow relief measures – these will have to be repaid. Speak to your bank for more details and see a summary of bank-by-bank relief as announced to date here.

The Competition Act has also been relaxed to allow retail tenants to get together and present a unified negotiating position to landlords in the areas of evictions, rental discounts and rental “holidays”. This is already happening with “active” negotiation and demands between retail landlords and tenants.

8th: Tourism sector relief

A R200 million fund has been set up to help SMMEs in the tourism sector (Read “COVID-19 interventions for the tourism sector” here).

It applies to SMMEs with R2.5 Million or less. 70% of pay outs will be to Black owned Businesses with a bias towards rural areas.

9th: Other

The CIPC have extended the deadline for submission of the Annual Return, if you are required to submit during the lockdown process to April 30.

Government is considering suspending employers and employees UIF contributions and employer payments to the Skills Development Fund.

To date most businesses are reportedly finding that Business Interruption Insurance claims are not being considered by insurance companies.

Expect more initiatives to emerge as we move deeper into the coronavirus crisis. How much these measures will cushion the shock to the economy is unknown. They are, considering how little fiscal space there is, a creative and welcome attempt to help business and people affected by the lockdown and other restrictions. Nevertheless, the economy is virtually certain to enter a deep recession, particularly following the downgrade by Moody’s on March 27.

Remember we are facing desperate times and the nation, led by President Ramaphosa, has shown courage and determination in facing down the coronavirus.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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On a Lighter Note – Some Entertaining Tax Stories

UK Revenue officials recently released some entertaining excuses from taxpayers:

  • One taxpayer claimed their mother-in law was a witch and had cursed them.
  • Some said that hamsters and dogs had eaten the post.
  • A taxpayer was up a mountain and without internet access.
  • Some strange expense claims were received, such as pet food for a Shih Tzu ‘guard dog’ and a meals claim of 250 days of sausages and chips eaten at a cost of £4.50 per day.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Budget 2020: Tips for Tito – Make Your Voice Count!

Every year the Minister of Finance asks us what we would like to see in the budget and a “Budget Tips” portal on the National Treasury website is open. This year he asks in particular for our views on “What can government do to achieve faster and more equitable economic growth?”

Your voice is important! We’ll show you how to be heard, with hyperlinks to the channels you can choose from.

To give you the idea, last year there were many differing tips ranging from the amusing and the serious to the overly optimistic….

On 26 February 2020 the Minister of Finance, Tito Mboweni, will be making his annual budget speech.

Traditionally, the Minister asks the public what they would like to see in the budget and a “Budget Tips” portal on the National Treasury website is open. Citizens are encouraged to submit their tips to the Minister either on that Portal or by Twitter @TreasuryRSA with the hashtag #TipsForMinFin and “#RSABudget2019” (presumably Treasury will update that hashtag to 2020). This year he asks in particular for your views on “What can government do to achieve faster and more equitable economic growth?”

If you have ideas, make your voice count! Last year there were many differing tips, from the amusing (give free Lotto tickets to regular electricity payers) and the serious (reduce corporate tax to 15% for companies with a turnover of less than R10 million to encourage job creation) to the overly optimistic (give a tax rebate to those who have upgraded security in their homes).

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Directors: Be Careful, You Will Be Held More Accountable In 2020

Being a company director (or a senior manager) comes with onerous duties and risks which require constant management.

And 2020 is shaping up to be a year in which you will find yourself under increasing scrutiny, with the NPA now showing a distinct appetite for charging delinquent directors criminally, and with the ongoing risk of personal liability and class actions by trade unions and other stakeholders.

We discuss the standards to which you are held by the Companies Act and remind you of several specific and growing risk areas, not all of them immediately obvious but all of them important.

The past few years have seen scandals emerging in both the private and public sectors. Steinhoff, State Capture, Eskom, the Guptas and Bosasa, to name a few, have revealed how endemic corruption has become in South Africa.

The National Prosecuting Authority (NPA) is now beginning to charge those who have been involved in these scandals. This has been greeted with relief by the public, who have become increasingly frustrated that perpetrators have appeared to have escaped from accountability for their actions.

Clearly, the directors and senior managers of these affected entities are being scrutinised and face potential prosecution.

Your obligations and your risks

The Companies Act places onerous obligations on directors and senior managers who are to perform their duties:

Having the necessary skills and experience to make informed, independent decisions,
Keeping themselves up to date on the plans and activities of the company,
Having sufficient data to make carefully considered and impartial recommendations to all issues raised at directors’ meetings, and
With no conflicts of interest. If a director has a conflict or potential conflict, then that director(s) shall make full disclosure of the conflict to fellow board members.

Failure to adhere to these standards opens directors to the possibility of being liable for any damages or losses incurred. In certain instances they face the potential to be held criminally liable and directors who transgress by failing to meet their obligations can also be disbarred as directors either permanently or on a short-term basis.

Additionally stakeholders, such as unions, may undertake class action against directors personally.

Other danger areas

Now that all directors are under increasing scrutiny, you also need to bear in mind issues such as your company causing environmental damage, trading in insolvent circumstances (for example SAA directors face potential litigation here), failing to ensure your business is protected against hackers, poor accounting policies and being party to the company suffering reputational damage which leads to a collapse in the share price (Tongaat directors risk exposure to this).

As a director, remember you are in the public’s and the NPA’s sights. Be extra careful that you execute your duties in line with the dictates of the Companies Act.

If in doubt, use your accountant as a sounding board and advisor.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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Small Businesses: How to Survive and Thrive

SMMEs (Small, Medium and Micro-Enterprises) play an integral role in our economy, and it is alarming therefore to read recent research showing that a massive 70% – 80% of South African small businesses fail within five years.

Why the high failure rate? What factors contribute to the success or failure of small businesses? Why are some entrepreneurs more successful than others, and what characteristics should you have (or develop) to maximise your own chances of success? What can government contribute?

Read on for the answers to these questions and more…

“Why do approximately 70% – 80% of small businesses fail within five years? Why are certain entrepreneurs more successful than others?” (Extract from UWC article below)

Recent research by the University of the Western Cape on the rate of failure of small businesses makes for interesting reading and provides insights that we all really need to take on board, particularly in these hard economic times.

SMMEs, their importance and their failure rates
Globally 60 to 70% of jobs are found in SMMEs (Small, Medium and Micro-Enterprises) but in South Africa this figure is only just over 28% despite more than 95% of businesses in South Africa being SMMEs.

South Africa has a higher failure rate of SMMEs than elsewhere in the world (70% – 80% of our small businesses fail within 5 years). In previously disadvantaged communities only 1% of businesses progress from employing less than 5 people to having staff of 10 or more.

6 factors that can make or break an SMME business
The research indicates that in terms of success factors, 40% can be attributed to the entrepreneur. The characteristics of this person are crucial and they need to show:

  1. Persistence, being proactive and being a self-starter,
  2. That they do not react to events but are continually planning (good planning is an important success indicator), innovating, having an ability to learn and apply this learning and having a culture of achievement.

The factors contributing to failure are ones we are aware of:

  1. Lack of skills – government and large corporates snap up almost all of South Africa’s limited skills,
  2. Difficulty in accessing finance – lending institutions require a track record before providing funding to businesses,
  3. Poor accounting records and limited information systems,
  4. Late payment by state institutions and large corporates (Kenya is considering passing legislation that compels paying SMMEs on time).

There are others too like corruption crowding out legitimate SMMEs and low bargaining power.

Entrepreneurs – what can you do?
Have a look at the 6 factors listed above. Maximise the positives, and do something about the problem areas. Remember, your accountant is there to help you succeed so don’t be shy to ask for advice.

What can government do?
Clearly the country is missing a sizeable opportunity to grow the economy and to reduce our 27% unemployment rate.

One way to get this going is through mentoring and training. Government programs are having a limited impact and there is space for business to also play its part. Why not interview some SMME owners and determine if they have the characteristics as shown above? Those that have the attributes can be successfully mentored to get good accounting records and systems, skills can be addressed as well as access to finance.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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