Tax season is a time that everyone dreads. As a business owner frustrations can run high if you’re not actually sure what you need to submit and how to go about it. According to research conducted by TaxTim, a high percentage of small business owners do not get professional help when submitting their annual tax returns. In fact, only 13% handed the role over to an outsourced professional.
Even with the benefits of e-filing, tax returns can become a nightmare. This is why hiring a reliable tax consultant can make all the difference. They have the expertise and understanding to help each business with its unique tax needs. However, we know that not everyone has the luxury of their own internal finance team or access to a consultant. So we asked Reinier Duraan, Tax Lecturer, and Director of CommonCents Accounting, a Cape Town-based accounting services firm, for a few tax tips that SMEs should keep in mind this tax season. Here’s what he had to say.
Ensure that your business is tax compliant
Register with SARS sooner rather than later. This is vital as it not only affect your tax returns but also the relationships you have with other businesses. Many companies won’t work with you unless your business is tax compliant. As an SME, failure to comply with tax requirements can also have a negative effect on obtaining financing, overdraft facilities or business credit.
Clarify what type of tax you’re liable for
Depending on the size of your company and whether it has a turnover of less than R20 million per year, you could qualify as a small business corporation (SBC). There are significant tax savings if you are considered a SBC. In general, small businesses could be liable for Value Added Taxation (VAT), Income Tax and Dividend Withholding Taxes. Income Tax can be paid by means of provisional tax. If a small business employs staff, the business will be responsible for withholding the taxes due by their employees on their salaries earned, and pay that over to SARS, on behalf of the employee. This is also referred to as Pay-As-You-Earn (PAYE). Directors of small businesses are also required to pay PAYE.
Find out what tax deductions you qualify for
This is company and industry-specific. Manufacturing companies, for example, have a number of specific tax deductions which lightens the tax burden. Companies conducting research and product development also qualify for tax deductions. For some, it can be up to 150% of their research and development spend throughout the year. It’s good to make yourself aware of the kinds of rebates available and speak to a tax consultant if you’re not sure what applies to your business.
Some other deductions for SMEs include:
- Small businesses that pay their employees an annual salary of less than R500 000 can be exempt from paying the Skills Development Levy (SDL)
- Small businesses that use their homes as business premises can benefit from tax deductions such as interest payment on the bond and daily expenses incurred from running the business.
- Gifts bought for clients
- Allowance for a building that you own, or special tax deductions for leased assets.
These are just a few examples but you can find a full list here.
Hire a tax consultant
Tax consultants can assist your SME in leveraging the tax deductions available to you. The important thing to remember when trying to find a tax consultant is, to make sure that they are registered as a Tax Practitioner with SARS and a Recognised Controlling Body (RCB). If they are not registered with SARS and an RCB, they will not have access to specific services which are available to registered tax practitioners. You can check the tax practitioner’s registration status with SARS by using their registration number.
CommonCents Accounting is an example of a reputable, registered practitioner that can help take care of your financial matter and tax needs to help you make the best decisions for your business and ensure that all compliance boxes are ticked. Do some research, look into the offerings by companies like this and consider making use of their expertise.
How can you be sure that making use of a tax consultant will actually benefit your SME?
A professional consultant understands what it takes to run a small business and can help you make important financial decisions that have a direct impact on the success of your SME.
They can educate you on new developments in the tax industry and help you with a strategic tax plan
Due to their expertise, tax consultants should be able to do far more than just file your tax return. They will be able to help you with business planning, find ways of saving money, manage business expenses and minimise income taxes. Tax consultants are constantly aware of any new tax laws and regulations that affect your business. They are also able to apply the laws to your business and align these with your business strategy to help minimise liability and increase the resources available to help your business grow.
They can optimise your company’s tax structure
Consultants can help you identify tax liabilities that are specific to your type of business and work with you to improve those. They can also advise on whether sole proprietorships, Corporations or LLCs provide you with the most tax-friendly structure and are flexible for your business operations. By optimising your tax structure, your tax consultant can enable you and your business to obtain the maximum benefit and pay the least amount of tax due.
They can ensure that all possible tax deductions are taken into account
You might not be aware of all the different tax deductions you qualify for. But a tax consultant does. They can help you identify what processes and practices you can put in place to avoid missing out on tax deductions. They also know exactly what documentation is required and can ensure that you have everything in order when the time comes to submit your tax return.
Allowing a professional to handle the tedious tasks involved with taxes will free you up to focus on bringing business in. While we have outlined important reasons to consider getting a professional to help you manage your taxes we realise that as a SME you may not have the necessary funds to invest in such an expense. You may want to invest capital in far more pressing things like purchasing inventory, paying rent or upgrading business equipment. But Lulalend provides a solution by offering easy access to short-term funding so that you have more working capital to hire a tax consultant who can help you save money in the long run. With our fast, easy online application process you can access business funding up to R5m in 24 hours.
Contact us for more information about how we can help your business with funding.