It’s the end of the month. You have completed all the relevant fields on your VAT return and are about to click “Submit”. The following thoughts cross your mind “Will SARS choose my VAT return for review?” “Have I considered everything that I need to in my VAT return?” “Have I analysed my data sufficiently to be comfortable with the numbers submitted?”
You apprehensively click Submit. And the wait begins…
SARS reviews may be daunting, but the ability to prepare adequately could relieve some of that anxiety. There are a few things that SARS may consider whilst analysing your VAT return, which could flag your return for review, namely:
- Significant movements
“Do you move from a R5million VAT payable in January to a R100 000 VAT refundable in February?”
The underlying nature of the business could cause the significant fluctuations such as a cyclical sales pattern or a month in which one buys new equipment and machinery. Having an appreciation of the underlying business and its drivers can help one understand the effect on the VAT return and plan accordingly.
Any return in an overall VAT refund position could result in a spotlight being placed on your return. This is generally to confirm that the VAT refund has been determined correctly before the tax authorities will honour the refund.
- The proportion of zero-rated supplies differs month on month
Provided the nature of your business is not cyclical, it is not anticipated that the zero-rated supplies will differ significantly month on month.
- Having exempt and/or zero-rated supplies and claiming input VAT
It is of utmost importance to ensure that your zero-rated and exempt supplies are correctly classified and that all the input VAT claims relate to allowed expenses.
- Being acquired within a group of companies
This is usually as a result of the intercompany transactions that are processed by virtue of being part of a group of companies, and to ensure that tax implications have been correctly accounted for.
Penalties and interest become payable for any incorrect disclosure in your VAT return, thus it is vitally important that you get your VAT return correct before submission. Furthermore, the timeline to put together the information for a review is generally quite tight and the quicker one responds, the better. Thus, the following extra checks and analysis for the month at hand can be performed before submitting your VAT return:
- Performing a month on month trend analysis of your VAT.
- Analysing your zero-rated and exempt supplies for any improper classification.
- Analysing your expenses to ensure that there are no disallowed input VAT supplies upon which VAT has been claimed.
- Identifying the top 10 supplies per category of the VAT return and compiling the documentation (in anticipation of the review).
- Performing your revenue to output VAT reconciliation.
As has been seen the past few years, SARS can easily start using other metrics for and methods of selecting returns for the audit so it is important each month to be nonetheless prepared by proactively ensuring your VAT data is accurate before you submit.