Page 389 - SAIT Compendium 2016 Volume2

IN 27
4.1.4
Income Tax acT: InTeRPReTaTIon noTes IN 27 The employer’s right to recover
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• •
An employer who incurred a personal liability as a result of its failure to deduct the correct amount of employees’ tax and who has not been absolved from this liability has a right to recover the amount from the employee in respect of whom the employees’ tax was paid. The amount may be recovered from future remuneration which becomes payable by the employer to the employee.*
An employer who incurred a personal liability as a result of its failure to pay the amount of employees’ tax which it has deducted over to SARS has no right of recovery. This is so, because it has already deducted the employees’ tax from the relevant employee(s), but failed to pay it over to SARS. Where an employer who pays remuneration—
- in a duciary capacity; or
- as a trustee of an insolvent estate; or
- as an executor; or
- as an administrator of a bene t fund, pension fund, provident fund, retirement annuity fund or
any other fund,
is personally liable for the payment of employees’ tax, additional tax, penalty or interest, he or she will be entitled to recover the amount paid from the person on whose behalf the amount was paid. Such an employer may recover the amount by retaining any money that may be in his or her possession or may come to him or her in his or her representative capacity.†
4.2 Representative employer
4.2.1 Liability to deduct and pay over to SARS
Every representative employer is subject to the same duties, responsibilities and liabilities under the Fourth Schedule as if the remuneration which the represented employer pays or which the representative employer pays in its representative capacity were remuneration paid in its personal capacity.‡ Effectively, this means that a representative employer is jointly and severally liable to —
• deduct or withhold employees’ tax from remuneration; and
• pay the employees’ tax to SARS within the prescribed period.
4.2.2 Personal liability – failure to deduct
Although a representative employer has a duty to deduct the correct amount of employees’ tax§, no personal liability is created in respect of an amount that it failed to deduct. However, the employer who it represents remains personally liable for the payment to SARS of any amount which the representative employer failed to deduct or withhold from remuneration¶.
4.2.3 Personal liability – failure to pay over to SARS
A representative employer who deducted employees’ tax but failed to pay it over to SARS is personally liable for the payment thereof to SARS, but generally only to the extent of the assets belonging to the person it represents which are in the representative employer’s possession, management, disposal or control**. However, where the representative employer—
• alienates, charges or disposes of any money received or accrued in respect of which the tax is
chargeable; or
• disposes of any fund or amount of money belonging to the represented employer which is in his or her
possession or comes to him or her after the tax has become payable and if such tax could legally have been paid from or out of such fund or money, the representative employer shall be personally liable for the payment of employees’ tax, additional tax, penalty or interest payable by him or her in his or her representative capacity,†† and SARS may recover the outstanding amounts from the representative employer to the extent that it remains unpaid by the employer‡‡.
4.2.4 The representative employer’s right to recover
Where a representative employer is personally liable for the payment of employees’ tax, additional tax, penalty or interest to SARS, it will be entitled to recover the amount paid to SARS from the person on whose behalf the amount was paid. Recovery may take place by retaining any money that may be in its possession or may come to it in the representative capacity.
4.3 Shareholders and directors
4.3.1 Personal liability – failure to pay over to SARS
Where the employer is a company, every shareholder and director who —
• controls; or
• is regularly involved in the management of the company’s overall nancial affairs, is personally
liable for the employees’ tax, additional tax, penalty or interest for which the company is liable§§. Any outstanding employees’ tax, additional tax, penalty or interest is fully recoverable from the relevant shareholders and/or directors to the extent that it remains unpaid by the employer.¶¶
* Paragraph 5(3) of the Fourth Schedule
† Paragraph 16(2A) of the Fourth Schedule ‡ Paragraph 16(1) of the Fourth Schedule
§ Paragraph 16(1) of the Fourth Schedule
¶ Paragraph 5(1) of the Fourth Schedule
** Paragraph 16 (2) of the Fourth Schedule †† Paragraph 16(2B) of the Fourth Schedule ‡‡ Paragraph 16(2D) of the Fourth Schedule §§ Paragraph 16(2C) of the Fourth Schedule ¶¶ Paragraph 16(2D) of the Fourth Schedule
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