Recon to the Next Level (IT14SD)
07
Jun

What do I mean with “recon to the next level”? Maybe you have heard about the SARS form called the IT14SD. This form is only applicable to companies and not yet to individuals or trusts.

SARS issued a guide on “How to complete the IT14SD” and it can be download at

http://www.sars.gov.za/AllDocs/OpsDocs/Guides/IT-GEN-03-G01%20-%20How%20to%20complete%20the%20IT14SD%20Supplementary%20Declaration%20Form%20-%20External%20Guide.pdf

This guide is a hefty 48 pages, but I will keep it short and try to keep it sweet and summarise the form for you.

If a company gets selected for verification by SARS after submitting the annual income tax return (ITR14), SARS might issue a letter (for whatever reason) called the “Verification of Income Tax Return” to the company. This letter states that the company can either submit a revised IT14 income tax return, or alternatively submit the Income Tax Supplementary Declaration (IT14SD) by a specified due date.  If the company decides to submit the IT14SD, it must reconcile the Income Tax (IT), Value-Added Tax (VAT), Pay-As-You-Earn (PAYE) and Customs Declarations for the applicable tax year.

The form distinguishes between different kinds of companies such as a dormant company, body corporate, a share block company, a micro business, a small business and a medium to large business, as per the classifications in the SARS guide.

To complete this form, the company will need its annual financial statements, the ITR14 income tax return, the VAT201 returns, EMP201 returns and any Customs Declarations for the applicable tax year.

The methodology of the form is to compare amounts declared on the ITR14 income tax return with the total of the amounts declared on the respective VAT201, EMP201 and Customs Declarations during the applicable tax year. If there are any discrepancies in excess of R100 between these amounts, the company needs to provide a reconciliation with reasons.

In the event that there are unreconciled differences, SARS may proceed to levy penalties and interest (at the very least) on any amounts that they deem under-declared or over-claimed. It might even lead to any taxpayer’s worst nightmare – a SARS audit.

EMP201 Pay-As-You-Earn Reconciliation

Let’s start with the reconciliation most people are familiar with – the PAYE reconciliation. The EMP501 employer reconciliation is completed and submitted every six months.  This is the process where you reconcile the Pay-As-You-Earn declared and paid on the EMP201 returns for that period, and generate the IRP5 tax certificates for your employees.

The IT14SD takes this reconciliation a step further. Here the company has to reconcile the payroll costs declared on the income tax returns as tax deduction with the payroll costs declared on the EMP201 returns for the tax year.

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Income Tax Reconciliation

The next reconciliation is probably the easiest of the four reconciliations on the IT14SD, namely Income Tax.

The reconciliation is between the net profit or loss and the calculated profit or loss for the year, and represents the difference between the accounting profit or loss and the taxable profit or tax loss.

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VAT Reconciliation

Next up is the VAT reconciliation.

Do you reconcile your output VAT with your sales and your input VAT with you purchases and expenses?  Well, you need to as this is the reconciliation required on the IT14SD. A good time to do this will be after you last VAT return of the financial year, but first prize belongs to the person that does this after each VAT201 submission.

The IT14SD requires a reconciliation between the income declared on the ITR14 income tax return and the amount of supplies declared on the applicable VAT201 returns, as well as a reconciliation between purchases and applicable expenses claimed on the ITR14 income tax return and the amount declared under input VAT.

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Customs Declarations Reconciliation

Customs declarations also need to be reconciled between the information declared on the SAD500, VAT201 and other relevant documentation, and the amounts claimed and declared in the ITR14 income tax return for imports and exports.

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The IT14SD proves yet another reason why it is important to not be penny-wise-pound-foolish when it comes to proper bookkeeping and tax compliance. It can save a lot of heartache (and money) if a company invests in proper, accurate and timely bookkeeping and tax compliance services that will also deliver many other value adding benefits.

Petro van Deventer

Senior Manager

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