A person will be remembered by the restricting access to income or capital.

DON’T SHOOT
THAT’S NOT CRICKET - OR FROM THE HIP
legacy he leaves. I refer to legacy in
the broader sense, not merely Rands
and Cents. Your will is your last word
to your loved ones and probably the
Although a will is a serious document
it is perfectly in order to personalise a
will. It does after all reflect the testators’
character and personality. An amusing
CAMERON & PRENTICE

C H A R T E R E D A C C O U N T A N T S

4TH QUARTER 2006 VOLUME 6

( S A )

SHOULD THAT BE ‘FORE’! It is imperative to

amend or update a
will for changes in
first document read by them after your
death. It is therefore important to
straighten out issues prior to death.
clause in a client’s will drafted in 1985
read as follows:
“ To the rest of my workers, in my
NEWS, VIEWS AT T I T U D E S O F A 2 1 S T C E N T U R Y F I R M

Recreational clubs currently qualify for tax

pecuniary or family
circumstances but,
Hurtful terms in a will should be avoided.
Do not try and triumph or win an
argument by having the last word in
employ at the time of my death, I
bequeath the sum of R10.00 (TEN
RAND) each so that they may rejoice
ONE THING YOU CAN’T LEARN
exemption in terms of section 10(1)(d) of
the Income Tax Act (the Act). In many
as Peter Prentice explains, an
impulsive change in anger or on a
momentary whim may result in a
your will.
Be cautious about including clauses in
and celebrate my departure as I rejoice
and celebrate departing from them.”
FROM A TEXTBOOK : EXPERIENCE
your will, which put your assets under So, I would suggest that you re-look
ways, clubs have received more
favourable tax treatment than Public
legacy of extreme unhappiness or just ask...
the control of someone who does not
have your family interests at heart. Do
at your will and decide if what is written
is still relevant and the way in which
Qualifying to put the esteemed CA designation after your name is a true accomplishment. But in
family division which no amount of order to achieve such an accomplishment, clerks seeking to become qualified Chartered Accountants
Benefit Organisations (PBO’s) in that they not try and impose unnecessary terms you wish to be remembered.
money or recompense will heal. in South Africa need to undergo a 3-year training contract either in an auditing or commercial
currently enjoy complete tax exemption for all income environment. Lara Forsyth sheds light on the rigors of the Cameron & Prentice training contract.
received, including trading income, whilst PBO’s are now
subject to tax on their trading income. There has been recent debate in the financial press regarding they can learn to see the bigger picture.
the IRBA and SAICA. And one issue has been made decidedly
Chris Norris examines the implications. clear. That is, to uphold the integrity of the profession and
At this point, we would also like to assure our clients that
Q: Is there VAT on the annual duty charged Q: And what are the benefits of qualifying each and every one of these trainees is a bright, highly
to maintain a standard that is accepted worldwide. At
by CIPRO? as an SBC? trained individual who shows promise in their chosen career
SARS has recently introduced provisions volunteers without compensation; a golf club with substantial value Cameron & Prentice we agree with this belief, which is why
into the Act to subject recreational / and locked up in its fairways!); A:The annual duty of R450 charged by CIPRO is a tax A: An SBC pays 0% tax on the first R40 000 of taxable and we have made it abundantly clear that they are to
we make sure that all our trainee staff members truly get
(stamp duty) and is not subject to VAT. Our invoices income, 10% on income between R40 000 and R300 000 deliver quality and unquestionable service during the term
sporting clubs to tax treatment similar to comprehend the skills, discipline and courage required
• Income from any other source (e.g. • Newly established clubs must apply reflect this duty separately and VAT is only charged on and 29% on any excess. This translates into a tax saving
to that of PBO’s. The new rules allow our fee for completing the annual return on behalf of our of R61 000 on a taxable income of R300 000. SBCs also of their engagement.
investment income and non-member for exemption before the end of their to practice the profession of chartered accountancy.
for a transition period for existing clubs clients. qualify for a 100% wear and tear allowance on
income) if that income does not first year of assessment whilst existing This demand may appear to be overwhelming for a first
but will apply to all new clubs that are manufacturing plant and machinery acquired and a Being a medium-sized firm, Cameron & Prentice is able to
exceed R20 000 per annum. clubs have until 31 March 2011 to year trainee fresh out of university, particularly when it
established after 1 April 2007. The 50:30:20 wear and tear allowance on other business
apply. Q: What constitutes an SBC for tax purposes? offer trainees excellent all round hands-on experience and
transition period for existing clubs • Expenditure in producing exempt assets. comes to administering an audit. But we have recognised
responsibility. All trainees are expected to manage their
effectively allows a period of four years, income will not be allowed as a tax It is unclear from the wording of the A: In order to qualify as an SBC (Small Business the gap between a student’s knowledge on exit from
Corporation) for tax purposes, the following criteria must assignments with the competence and professionalism of
up to 31 March 2011, for such clubs to deduction against taxable income; provisions whether or not a club that university, and the practical implementation thereof at the
be met: Q: Why can’t I claim VAT on car hire costs? a fully-fledged CA. And we expose our clerks to the inner
apply for exemption. allows non-members access to its start of an audit. Continued page 2
• In order to qualify for exemption, a functioning of our company and client’s business so that
facilities will qualify for exemption. • A CC or company (other than an employment
club must be established solely to A: The VAT Act specifically prohibits the claiming of VAT
Our view is that a club can still be said company);
The new rules will essentially work input tax credits on the acquisition of a motor car as
provide social and recreational • Owned by natural persons who don’t own shares in
as follows: to have been established solely to defined (essentially a passenger vehicle). It makes no
amenities of facilities for its members. any other company or CC (except listed shares, unit
provide social and recreational amenities difference how the car is acquired (e.g. cash purchase,
Exemption is not automatic and all trusts etc)
• All club income is now subject to clubs will have to apply to SARS for
or facilities for its members, even if it • Gross income not exceeding R14 million;
HP. lease or car hire) or what the car is used for, no
input tax can be claimed.
WHAT’S IN
income tax unless the income is allows non-members and guests of • Not more than 20% of income can come from
approval. SARS will only grant investment income or the rendering of personal
specifically exempt in terms of a new members to have access to its facilities. PERSONAL SERVICE COMPANIES
approval if the constitution of the services.
section – 10(1)(cO); It will however have to put systems Getting personal about tax
club meets certain criteria, which are
in place to track all non-member
• Section 10(1)(cO) provides for the very similar in nature to the criteria PLAYING THE TAX GAME
income, as only income from members
that a PBO’s constitution needs to
following types of income to be
exempt from tax: meet. In addition, members must
will be tax exempt. This is likely to be
challenging for most, if not all clubs,
(overheard) New tax for recreational clubs
be entitled to membership for at least IMPERATIVE OR IMPULSIVE
• Membership fees or subscriptions paid since it will have to distinguish for
one year and must not be allowed to Changing your will
by members; example between member and non-
sell their membership rights;
member green fees and between STARTING A BUSINESS
• Payments by members for social or
• If a club has had its exemption member and non-member bar and
recreational facilities provided directly Tips of the trade
approved, it risks losing its exemption restaurant income! Clubs would be
to the members (e.g. golf course fees
if it violates of any of the conditions well advised to start tackling these SKILL. DISCIPLINE. COURAGE.
or bar facilities);
of exemption. Under the worst case issues as soon as possible in order to Why our learners are leaders
• Fundraising activities of the club if scenario, the market value of its avoid the customary South African We’ll will be closing our doors from
those activities are of an occasional assets will be deemed to be taxable deadline rush. 22 December 2006 to 2 January 2006
nature and are undertaken by income (this would not be good for

www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected]
ED’S DESK STARTING A
Right, so you have settled on a name for your
IN BRIEF:
Cheque payments to the South African Revenue Service
PERSONAL SERVICES business and picked out the décor for your new
offices, but how do you make sure that your
SARS has recently stated on its VAT and PAYE returns that cheques must
bear the name “South African Revenue Service” and not the abbreviation
BUSINESS. THE business lasts longer than your newly printed
“SARS”. Taxpayers should thus ensure that cheques bear the full “South
African Revenue Service” name.
Advance Tax Rulings
The recent Advance Tax Ruling legislation, allows SARS to issue two new
LESS TAXING!
In the context of Personal Service Companies (PSC’s) SARS has recognised the
TIPS OF THE
stack of letterheads?

types of ruling. Binding private rulings and binding general rulings.

Taxpayers may now formally request a ruling from SARS in respect of the
tax treatment of a specific transaction. Assuming that the taxpayer discloses
all material facts in its application, the ruling will be binding on SARS when
main concern of small businesses, namely that the anti-avoidance aspects of
the PSC rules do not distinguish between tax avoidance mechanisms and
legitimate business arrangements. Chris Norris gets personal on the subject.
TRADE
At Cameron & Prentice we have put our
an assessment is made in connection with that transaction. Applications
heads together to bring you twelve
carry both an application fee (R10 000 or R2 500 for SMME’s) and a time
A PSC (i.e a company or a CC) is not claim any expenses, other than golden rules that will make sure you’re
based cost recovery fee. Taxpayers must also sign an engagement letter
specifically included in the definition of salaries paid, for tax purposes. in it for the long haul. These principles
with SARS. SARS will also continue with its practice of issuing private non-
an employee. may seem almost too obvious and
binding rulings to taxpayers free of charge. The far-reaching nature of the simplistic, but refer back to them from
Completion of IRP5’s A PSC is defined as any company or provisions meant that many entities time-to-time and you will see what we
In the section of its Guideline for Employers relating to the completion of CC where any service is rendered to a who should not have been PSC’s, were mean. Tip
Ah, the end of the (calendar) year is IRP5 certificates, SARS states that cents must be omitted when filling in client personally by a person who is caught by the rules. number
connected to the PSC (i.e. a shareholder Tip number one: five: you are
almost upon us and thoughts turn to income amounts. SARS has on a number of occasions incorrectly captured
By way of example, a client who had The primary financial objective of a
sunshine and holidays. Already the cents as Rands (e.g. R100 000.00 becomes R10 000 000). Problems can or member) and which meets certain Use technology spending the
his lawn cut twice a month by a one- business is to maximise after tax profit.
holiday cheer has crept into our busy then arise in getting SARS to correct the tax assessment and waive penalties other criteria. Under the old rules, effectively to save time. majority of your time. This
man garden service, who happened to It is one thing to be turning over
offices at Cameron & Prentice! and interest on underpayment of provisional tax. these criteria included circumstances Similar to number four, technology is could be key in determining where you
operate through a CC, would have been impressive figures, but what profit are
where the client made regular payments there to help you grow. Correct systems can make improvements to the
Another entity that is also busy at the 15th Anniversary of VAT required to withhold 34% PAYE from
to that entity or where the entity earned you really making after tax? will help you produce services and operation of your business.
moment is SARS. They have recently The South African VAT system attained its 15th anniversary on 30 September the monthly payments made to the
more than 80% of its income from one products faster, more effectively and
released some amendments that may garden service merely because the Tip number two: Tip number nine:
this year. Originally introduced at 10% in 1991, the rate was increased with less human error.
client.
well affect you, so be sure to cast your payments were made on a regular To incur expenditure to save tax alone Pay your creditors on time. Not only
to 14% in 1993 and has remained at that level ever since. For many years
eye over our IN BRIEF section. If an entity fell foul of the PSC rules, basis. is not a rational business decision. Yes, Tip number six: does this eliminate unnecessary
there has been much speculation that the rate will be increased. This has
The end of the year is also an important the consequences were severe. you may be able to claim on certain Cash is KING – make someone penalties or interest, but you never
so far not materialised and we consider it unlikely that the rate will be
Any non-withholding of PAYE had purchases you make, but you are still
time for many young people out there increased any time soon. Employees’ tax was required to be responsible for preparing invoices and know when you may need their help
negative tax risks in terms of penalties going to have to find the money to pay
who are making some important career deducted by the client, at the rate of collecting debt timeously. Many next!
and interest for the client, whose for it.
decisions. Trainee accountants are no 34%, from payments made to the PSC. potentially successful enterprises have
statutory obligation it is to withhold Tip number ten:
exception, who are all seeking To make matters worse, the PSC could floundered simply by overlooking this
tax from payments made to employees. Tip number three: Maintain a positive bank balance equal
internships in reputable firms. This is Continued from page 1 and takes on a more senior role in the basic rule.
A motor vehicle is not an investment. to 3 – 6 months of overhead costs.
a topic that we get quite passionate firm, attention is also given to the We all know it and we all like the Tip number seven: Cash flow is the lifeblood of any
about at Cameron & Prentice, which is That is why we have outsourced this
development of their organizational In recognising that the PSC rules were too strict, the following changes have been made: excitement of a new car parked in the
training requirement to an independent To know your business is to sign the company and it is an area that can
why we have dedicated a page to the skills, self-management and garage. However, cars depreciate and cheques. While delegation can be a cause you the greatest amount of
matter. professional organization. At the • SARS has conceded that regular provider might have fallen under business premises, finance
management of others, in order to the opportunity cost is huge.
commencement of training contracts, payments are a frequent feature the 80% income rule, he can now charges, fuel and repairs and positive thing, it is imperative that you stress.
And finally, for those of you who may reach the target competency rating
trainees attend courses that are of legitimate ongoing business provide his client with an affidavit maintenance of business assets, have ultimate financial control. Not only
already be thinking ahead to the New of 4 out of 5 at the completion of the Tip number four: Tip number eleven:
structured with practical scenarios to relationships and are not to the effect that the entity is not if the premises and assets are used will it minimise the risk of any fraudulent
Year and have plans of starting a training contract as prescribed by You are effectively selling time – learn Always budget to make a profit. Don’t
necessarily an automatic indicator a PSC. Armed with this affidavit, wholly and exclusively for the activities but you will also have an
develop the theoretical auditing to delegate effectively. There are many
business, be sure to see what our in- SAICA. of an employer/employee the client is no longer required to purposes of trade; be afraid to think big and be confident.
knowledge taught at universities, into accurate idea of how your company is
house Cameron & Prentice “gurus” have relationship. The regular payment deduct tax; highly skilled and competent people As they say, “you’ve got to be in it to
that which is required in practice. We firmly believe that a training contract doing, where the majority of your
to say on the matter. It’s advice that aspect has now been deleted from • Finally, SARS can now issue a tax out there who will be able to administer win it.”
at Cameron & Prentice will empower the PSC definition; • The restriction on tax deductibility directive to reduce the 34% flat expenses lie and how you can
will stand you in good stead for a long areas of your business that you don’t
Special attention is also paid to the any trainee with powerful business tools of expenses has also been relaxed. withholding tax rate to a lower rate potentially reduce unnecessary costs. Tip number twelve:
time to come. need to. You will find that although you
development of interpersonal and for the future. After all, we believe that • The requirement that the client PSC’s are now entitled to that more closely matches the final Business is not unlike a game. Take
may be paying another salary, freeing Tip number eight:
Until next we meet. bears the onus of proving that the deductions in respect of legal tax liability.
communication skills. Then, as a trainee there is one thing you can’t learn from up your time to do what you do best time out to strategise and think of ways
payments were not to a PSC has expenses, bad debts, benefit funds, Keep strict time records of your business
Happy holidays! progresses through his/her contract a textbook – and that is experience. to improve your business. And above
been relaxed. Where the service operating expenses related to will ultimately be of benefit to your activities. Time is money. Monitor where
Ed business. all, have fun!

www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected]
ED’S DESK STARTING A
Right, so you have settled on a name for your
IN BRIEF:
Cheque payments to the South African Revenue Service
PERSONAL SERVICES business and picked out the décor for your new
offices, but how do you make sure that your
SARS has recently stated on its VAT and PAYE returns that cheques must
bear the name “South African Revenue Service” and not the abbreviation
BUSINESS. THE business lasts longer than your newly printed
“SARS”. Taxpayers should thus ensure that cheques bear the full “South
African Revenue Service” name.
Advance Tax Rulings
The recent Advance Tax Ruling legislation, allows SARS to issue two new
LESS TAXING!
In the context of Personal Service Companies (PSC’s) SARS has recognised the
TIPS OF THE
stack of letterheads?

types of ruling. Binding private rulings and binding general rulings.

Taxpayers may now formally request a ruling from SARS in respect of the
tax treatment of a specific transaction. Assuming that the taxpayer discloses
all material facts in its application, the ruling will be binding on SARS when
main concern of small businesses, namely that the anti-avoidance aspects of
the PSC rules do not distinguish between tax avoidance mechanisms and
legitimate business arrangements. Chris Norris gets personal on the subject.
TRADE
At Cameron & Prentice we have put our
an assessment is made in connection with that transaction. Applications
heads together to bring you twelve
carry both an application fee (R10 000 or R2 500 for SMME’s) and a time
A PSC (i.e a company or a CC) is not claim any expenses, other than golden rules that will make sure you’re
based cost recovery fee. Taxpayers must also sign an engagement letter
specifically included in the definition of salaries paid, for tax purposes. in it for the long haul. These principles
with SARS. SARS will also continue with its practice of issuing private non-
an employee. may seem almost too obvious and
binding rulings to taxpayers free of charge. The far-reaching nature of the simplistic, but refer back to them from
Completion of IRP5’s A PSC is defined as any company or provisions meant that many entities time-to-time and you will see what we
In the section of its Guideline for Employers relating to the completion of CC where any service is rendered to a who should not have been PSC’s, were mean. Tip
Ah, the end of the (calendar) year is IRP5 certificates, SARS states that cents must be omitted when filling in client personally by a person who is caught by the rules. number
connected to the PSC (i.e. a shareholder Tip number one: five: you are
almost upon us and thoughts turn to income amounts. SARS has on a number of occasions incorrectly captured
By way of example, a client who had The primary financial objective of a
sunshine and holidays. Already the cents as Rands (e.g. R100 000.00 becomes R10 000 000). Problems can or member) and which meets certain Use technology spending the
his lawn cut twice a month by a one- business is to maximise after tax profit.
holiday cheer has crept into our busy then arise in getting SARS to correct the tax assessment and waive penalties other criteria. Under the old rules, effectively to save time. majority of your time. This
man garden service, who happened to It is one thing to be turning over
offices at Cameron & Prentice! and interest on underpayment of provisional tax. these criteria included circumstances Similar to number four, technology is could be key in determining where you
operate through a CC, would have been impressive figures, but what profit are
where the client made regular payments there to help you grow. Correct systems can make improvements to the
Another entity that is also busy at the 15th Anniversary of VAT required to withhold 34% PAYE from
to that entity or where the entity earned you really making after tax? will help you produce services and operation of your business.
moment is SARS. They have recently The South African VAT system attained its 15th anniversary on 30 September the monthly payments made to the
more than 80% of its income from one products faster, more effectively and
released some amendments that may garden service merely because the Tip number two: Tip number nine:
this year. Originally introduced at 10% in 1991, the rate was increased with less human error.
client.
well affect you, so be sure to cast your payments were made on a regular To incur expenditure to save tax alone Pay your creditors on time. Not only
to 14% in 1993 and has remained at that level ever since. For many years
eye over our IN BRIEF section. If an entity fell foul of the PSC rules, basis. is not a rational business decision. Yes, Tip number six: does this eliminate unnecessary
there has been much speculation that the rate will be increased. This has
The end of the year is also an important the consequences were severe. you may be able to claim on certain Cash is KING – make someone penalties or interest, but you never
so far not materialised and we consider it unlikely that the rate will be
Any non-withholding of PAYE had purchases you make, but you are still
time for many young people out there increased any time soon. Employees’ tax was required to be responsible for preparing invoices and know when you may need their help
negative tax risks in terms of penalties going to have to find the money to pay
who are making some important career deducted by the client, at the rate of collecting debt timeously. Many next!
and interest for the client, whose for it.
decisions. Trainee accountants are no 34%, from payments made to the PSC. potentially successful enterprises have
statutory obligation it is to withhold Tip number ten:
exception, who are all seeking To make matters worse, the PSC could floundered simply by overlooking this
tax from payments made to employees. Tip number three: Maintain a positive bank balance equal
internships in reputable firms. This is Continued from page 1 and takes on a more senior role in the basic rule.
A motor vehicle is not an investment. to 3 – 6 months of overhead costs.
a topic that we get quite passionate firm, attention is also given to the We all know it and we all like the Tip number seven: Cash flow is the lifeblood of any
about at Cameron & Prentice, which is That is why we have outsourced this
development of their organizational In recognising that the PSC rules were too strict, the following changes have been made: excitement of a new car parked in the
training requirement to an independent To know your business is to sign the company and it is an area that can
why we have dedicated a page to the skills, self-management and garage. However, cars depreciate and cheques. While delegation can be a cause you the greatest amount of
matter. professional organization. At the • SARS has conceded that regular provider might have fallen under business premises, finance
management of others, in order to the opportunity cost is huge.
commencement of training contracts, payments are a frequent feature the 80% income rule, he can now charges, fuel and repairs and positive thing, it is imperative that you stress.
And finally, for those of you who may reach the target competency rating
trainees attend courses that are of legitimate ongoing business provide his client with an affidavit maintenance of business assets, have ultimate financial control. Not only
already be thinking ahead to the New of 4 out of 5 at the completion of the Tip number four: Tip number eleven:
structured with practical scenarios to relationships and are not to the effect that the entity is not if the premises and assets are used will it minimise the risk of any fraudulent
Year and have plans of starting a training contract as prescribed by You are effectively selling time – learn Always budget to make a profit. Don’t
necessarily an automatic indicator a PSC. Armed with this affidavit, wholly and exclusively for the activities but you will also have an
develop the theoretical auditing to delegate effectively. There are many
business, be sure to see what our in- SAICA. of an employer/employee the client is no longer required to purposes of trade; be afraid to think big and be confident.
knowledge taught at universities, into accurate idea of how your company is
house Cameron & Prentice “gurus” have relationship. The regular payment deduct tax; highly skilled and competent people As they say, “you’ve got to be in it to
that which is required in practice. We firmly believe that a training contract doing, where the majority of your
to say on the matter. It’s advice that aspect has now been deleted from • Finally, SARS can now issue a tax out there who will be able to administer win it.”
at Cameron & Prentice will empower the PSC definition; • The restriction on tax deductibility directive to reduce the 34% flat expenses lie and how you can
will stand you in good stead for a long areas of your business that you don’t
Special attention is also paid to the any trainee with powerful business tools of expenses has also been relaxed. withholding tax rate to a lower rate potentially reduce unnecessary costs. Tip number twelve:
time to come. need to. You will find that although you
development of interpersonal and for the future. After all, we believe that • The requirement that the client PSC’s are now entitled to that more closely matches the final Business is not unlike a game. Take
may be paying another salary, freeing Tip number eight:
Until next we meet. bears the onus of proving that the deductions in respect of legal tax liability.
communication skills. Then, as a trainee there is one thing you can’t learn from up your time to do what you do best time out to strategise and think of ways
payments were not to a PSC has expenses, bad debts, benefit funds, Keep strict time records of your business
Happy holidays! progresses through his/her contract a textbook – and that is experience. to improve your business. And above
been relaxed. Where the service operating expenses related to will ultimately be of benefit to your activities. Time is money. Monitor where
Ed business. all, have fun!

www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected]
ED’S DESK STARTING A
Right, so you have settled on a name for your
IN BRIEF:
Cheque payments to the South African Revenue Service
PERSONAL SERVICES business and picked out the décor for your new
offices, but how do you make sure that your
SARS has recently stated on its VAT and PAYE returns that cheques must
bear the name “South African Revenue Service” and not the abbreviation
BUSINESS. THE business lasts longer than your newly printed
“SARS”. Taxpayers should thus ensure that cheques bear the full “South
African Revenue Service” name.
Advance Tax Rulings
The recent Advance Tax Ruling legislation, allows SARS to issue two new
LESS TAXING!
In the context of Personal Service Companies (PSC’s) SARS has recognised the
TIPS OF THE
stack of letterheads?

types of ruling. Binding private rulings and binding general rulings.

Taxpayers may now formally request a ruling from SARS in respect of the
tax treatment of a specific transaction. Assuming that the taxpayer discloses
all material facts in its application, the ruling will be binding on SARS when
main concern of small businesses, namely that the anti-avoidance aspects of
the PSC rules do not distinguish between tax avoidance mechanisms and
legitimate business arrangements. Chris Norris gets personal on the subject.
TRADE
At Cameron & Prentice we have put our
an assessment is made in connection with that transaction. Applications
heads together to bring you twelve
carry both an application fee (R10 000 or R2 500 for SMME’s) and a time
A PSC (i.e a company or a CC) is not claim any expenses, other than golden rules that will make sure you’re
based cost recovery fee. Taxpayers must also sign an engagement letter
specifically included in the definition of salaries paid, for tax purposes. in it for the long haul. These principles
with SARS. SARS will also continue with its practice of issuing private non-
an employee. may seem almost too obvious and
binding rulings to taxpayers free of charge. The far-reaching nature of the simplistic, but refer back to them from
Completion of IRP5’s A PSC is defined as any company or provisions meant that many entities time-to-time and you will see what we
In the section of its Guideline for Employers relating to the completion of CC where any service is rendered to a who should not have been PSC’s, were mean. Tip
Ah, the end of the (calendar) year is IRP5 certificates, SARS states that cents must be omitted when filling in client personally by a person who is caught by the rules. number
connected to the PSC (i.e. a shareholder Tip number one: five: you are
almost upon us and thoughts turn to income amounts. SARS has on a number of occasions incorrectly captured
By way of example, a client who had The primary financial objective of a
sunshine and holidays. Already the cents as Rands (e.g. R100 000.00 becomes R10 000 000). Problems can or member) and which meets certain Use technology spending the
his lawn cut twice a month by a one- business is to maximise after tax profit.
holiday cheer has crept into our busy then arise in getting SARS to correct the tax assessment and waive penalties other criteria. Under the old rules, effectively to save time. majority of your time. This
man garden service, who happened to It is one thing to be turning over
offices at Cameron & Prentice! and interest on underpayment of provisional tax. these criteria included circumstances Similar to number four, technology is could be key in determining where you
operate through a CC, would have been impressive figures, but what profit are
where the client made regular payments there to help you grow. Correct systems can make improvements to the
Another entity that is also busy at the 15th Anniversary of VAT required to withhold 34% PAYE from
to that entity or where the entity earned you really making after tax? will help you produce services and operation of your business.
moment is SARS. They have recently The South African VAT system attained its 15th anniversary on 30 September the monthly payments made to the
more than 80% of its income from one products faster, more effectively and
released some amendments that may garden service merely because the Tip number two: Tip number nine:
this year. Originally introduced at 10% in 1991, the rate was increased with less human error.
client.
well affect you, so be sure to cast your payments were made on a regular To incur expenditure to save tax alone Pay your creditors on time. Not only
to 14% in 1993 and has remained at that level ever since. For many years
eye over our IN BRIEF section. If an entity fell foul of the PSC rules, basis. is not a rational business decision. Yes, Tip number six: does this eliminate unnecessary
there has been much speculation that the rate will be increased. This has
The end of the year is also an important the consequences were severe. you may be able to claim on certain Cash is KING – make someone penalties or interest, but you never
so far not materialised and we consider it unlikely that the rate will be
Any non-withholding of PAYE had purchases you make, but you are still
time for many young people out there increased any time soon. Employees’ tax was required to be responsible for preparing invoices and know when you may need their help
negative tax risks in terms of penalties going to have to find the money to pay
who are making some important career deducted by the client, at the rate of collecting debt timeously. Many next!
and interest for the client, whose for it.
decisions. Trainee accountants are no 34%, from payments made to the PSC. potentially successful enterprises have
statutory obligation it is to withhold Tip number ten:
exception, who are all seeking To make matters worse, the PSC could floundered simply by overlooking this
tax from payments made to employees. Tip number three: Maintain a positive bank balance equal
internships in reputable firms. This is Continued from page 1 and takes on a more senior role in the basic rule.
A motor vehicle is not an investment. to 3 – 6 months of overhead costs.
a topic that we get quite passionate firm, attention is also given to the We all know it and we all like the Tip number seven: Cash flow is the lifeblood of any
about at Cameron & Prentice, which is That is why we have outsourced this
development of their organizational In recognising that the PSC rules were too strict, the following changes have been made: excitement of a new car parked in the
training requirement to an independent To know your business is to sign the company and it is an area that can
why we have dedicated a page to the skills, self-management and garage. However, cars depreciate and cheques. While delegation can be a cause you the greatest amount of
matter. professional organization. At the • SARS has conceded that regular provider might have fallen under business premises, finance
management of others, in order to the opportunity cost is huge.
commencement of training contracts, payments are a frequent feature the 80% income rule, he can now charges, fuel and repairs and positive thing, it is imperative that you stress.
And finally, for those of you who may reach the target competency rating
trainees attend courses that are of legitimate ongoing business provide his client with an affidavit maintenance of business assets, have ultimate financial control. Not only
already be thinking ahead to the New of 4 out of 5 at the completion of the Tip number four: Tip number eleven:
structured with practical scenarios to relationships and are not to the effect that the entity is not if the premises and assets are used will it minimise the risk of any fraudulent
Year and have plans of starting a training contract as prescribed by You are effectively selling time – learn Always budget to make a profit. Don’t
necessarily an automatic indicator a PSC. Armed with this affidavit, wholly and exclusively for the activities but you will also have an
develop the theoretical auditing to delegate effectively. There are many
business, be sure to see what our in- SAICA. of an employer/employee the client is no longer required to purposes of trade; be afraid to think big and be confident.
knowledge taught at universities, into accurate idea of how your company is
house Cameron & Prentice “gurus” have relationship. The regular payment deduct tax; highly skilled and competent people As they say, “you’ve got to be in it to
that which is required in practice. We firmly believe that a training contract doing, where the majority of your
to say on the matter. It’s advice that aspect has now been deleted from • Finally, SARS can now issue a tax out there who will be able to administer win it.”
at Cameron & Prentice will empower the PSC definition; • The restriction on tax deductibility directive to reduce the 34% flat expenses lie and how you can
will stand you in good stead for a long areas of your business that you don’t
Special attention is also paid to the any trainee with powerful business tools of expenses has also been relaxed. withholding tax rate to a lower rate potentially reduce unnecessary costs. Tip number twelve:
time to come. need to. You will find that although you
development of interpersonal and for the future. After all, we believe that • The requirement that the client PSC’s are now entitled to that more closely matches the final Business is not unlike a game. Take
may be paying another salary, freeing Tip number eight:
Until next we meet. bears the onus of proving that the deductions in respect of legal tax liability.
communication skills. Then, as a trainee there is one thing you can’t learn from up your time to do what you do best time out to strategise and think of ways
payments were not to a PSC has expenses, bad debts, benefit funds, Keep strict time records of your business
Happy holidays! progresses through his/her contract a textbook – and that is experience. to improve your business. And above
been relaxed. Where the service operating expenses related to will ultimately be of benefit to your activities. Time is money. Monitor where
Ed business. all, have fun!

www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected]
 A person will be remembered by the restricting access to income or capital.
DON’T SHOOT
THAT’S NOT CRICKET - OR FROM THE HIP
legacy he leaves. I refer to legacy in
the broader sense, not merely Rands
and Cents. Your will is your last word
to your loved ones and probably the
Although a will is a serious document
it is perfectly in order to personalise a
will. It does after all reflect the testators’
character and personality. An amusing
CAMERON & PRENTICE

C H A R T E R E D A C C O U N T A N T S

4TH QUARTER 2006 VOLUME 6

( S A )

SHOULD THAT BE ‘FORE’! It is imperative to

amend or update a
will for changes in
first document read by them after your
death. It is therefore important to
straighten out issues prior to death.
clause in a client’s will drafted in 1985
read as follows:
“ To the rest of my workers, in my
NEWS, VIEWS AT T I T U D E S O F A 2 1 S T C E N T U R Y F I R M

Recreational clubs currently qualify for tax

pecuniary or family
circumstances but,
Hurtful terms in a will should be avoided.
Do not try and triumph or win an
argument by having the last word in
employ at the time of my death, I
bequeath the sum of R10.00 (TEN
RAND) each so that they may rejoice
ONE THING YOU CAN’T LEARN
exemption in terms of section 10(1)(d) of
the Income Tax Act (the Act). In many
as Peter Prentice explains, an
impulsive change in anger or on a
momentary whim may result in a
your will.
Be cautious about including clauses in
and celebrate my departure as I rejoice
and celebrate departing from them.”
FROM A TEXTBOOK : EXPERIENCE
your will, which put your assets under So, I would suggest that you re-look
ways, clubs have received more
favourable tax treatment than Public
legacy of extreme unhappiness or just ask...
the control of someone who does not
have your family interests at heart. Do
at your will and decide if what is written
is still relevant and the way in which
Qualifying to put the esteemed CA designation after your name is a true accomplishment. But in
family division which no amount of order to achieve such an accomplishment, clerks seeking to become qualified Chartered Accountants
Benefit Organisations (PBO’s) in that they not try and impose unnecessary terms you wish to be remembered.
money or recompense will heal. in South Africa need to undergo a 3-year training contract either in an auditing or commercial
currently enjoy complete tax exemption for all income environment. Lara Forsyth sheds light on the rigors of the Cameron & Prentice training contract.
received, including trading income, whilst PBO’s are now
subject to tax on their trading income. There has been recent debate in the financial press regarding they can learn to see the bigger picture.
the IRBA and SAICA. And one issue has been made decidedly
Chris Norris examines the implications. clear. That is, to uphold the integrity of the profession and
At this point, we would also like to assure our clients that
Q: Is there VAT on the annual duty charged Q: And what are the benefits of qualifying each and every one of these trainees is a bright, highly
to maintain a standard that is accepted worldwide. At
by CIPRO? as an SBC? trained individual who shows promise in their chosen career
SARS has recently introduced provisions volunteers without compensation; a golf club with substantial value Cameron & Prentice we agree with this belief, which is why
into the Act to subject recreational / and locked up in its fairways!); A:The annual duty of R450 charged by CIPRO is a tax A: An SBC pays 0% tax on the first R40 000 of taxable and we have made it abundantly clear that they are to
we make sure that all our trainee staff members truly get
(stamp duty) and is not subject to VAT. Our invoices income, 10% on income between R40 000 and R300 000 deliver quality and unquestionable service during the term
sporting clubs to tax treatment similar to comprehend the skills, discipline and courage required
• Income from any other source (e.g. • Newly established clubs must apply reflect this duty separately and VAT is only charged on and 29% on any excess. This translates into a tax saving
to that of PBO’s. The new rules allow our fee for completing the annual return on behalf of our of R61 000 on a taxable income of R300 000. SBCs also of their engagement.
investment income and non-member for exemption before the end of their to practice the profession of chartered accountancy.
for a transition period for existing clubs clients. qualify for a 100% wear and tear allowance on
income) if that income does not first year of assessment whilst existing This demand may appear to be overwhelming for a first
but will apply to all new clubs that are manufacturing plant and machinery acquired and a Being a medium-sized firm, Cameron & Prentice is able to
exceed R20 000 per annum. clubs have until 31 March 2011 to year trainee fresh out of university, particularly when it
established after 1 April 2007. The 50:30:20 wear and tear allowance on other business
apply. Q: What constitutes an SBC for tax purposes? offer trainees excellent all round hands-on experience and
transition period for existing clubs • Expenditure in producing exempt assets. comes to administering an audit. But we have recognised
responsibility. All trainees are expected to manage their
effectively allows a period of four years, income will not be allowed as a tax It is unclear from the wording of the A: In order to qualify as an SBC (Small Business the gap between a student’s knowledge on exit from
Corporation) for tax purposes, the following criteria must assignments with the competence and professionalism of
up to 31 March 2011, for such clubs to deduction against taxable income; provisions whether or not a club that university, and the practical implementation thereof at the
be met: Q: Why can’t I claim VAT on car hire costs? a fully-fledged CA. And we expose our clerks to the inner
apply for exemption. allows non-members access to its start of an audit. Continued page 2
• In order to qualify for exemption, a functioning of our company and client’s business so that
facilities will qualify for exemption. • A CC or company (other than an employment
club must be established solely to A: The VAT Act specifically prohibits the claiming of VAT
Our view is that a club can still be said company);
The new rules will essentially work input tax credits on the acquisition of a motor car as
provide social and recreational • Owned by natural persons who don’t own shares in
as follows: to have been established solely to defined (essentially a passenger vehicle). It makes no
amenities of facilities for its members. any other company or CC (except listed shares, unit
provide social and recreational amenities difference how the car is acquired (e.g. cash purchase,
Exemption is not automatic and all trusts etc)
• All club income is now subject to clubs will have to apply to SARS for
or facilities for its members, even if it • Gross income not exceeding R14 million;
HP. lease or car hire) or what the car is used for, no
input tax can be claimed.
WHAT’S IN
income tax unless the income is allows non-members and guests of • Not more than 20% of income can come from
approval. SARS will only grant investment income or the rendering of personal
specifically exempt in terms of a new members to have access to its facilities. PERSONAL SERVICE COMPANIES
approval if the constitution of the services.
section – 10(1)(cO); It will however have to put systems Getting personal about tax
club meets certain criteria, which are
in place to track all non-member
• Section 10(1)(cO) provides for the very similar in nature to the criteria PLAYING THE TAX GAME
income, as only income from members
that a PBO’s constitution needs to
following types of income to be
exempt from tax: meet. In addition, members must
will be tax exempt. This is likely to be
challenging for most, if not all clubs,
(overheard) New tax for recreational clubs
be entitled to membership for at least IMPERATIVE OR IMPULSIVE
• Membership fees or subscriptions paid since it will have to distinguish for
one year and must not be allowed to Changing your will
by members; example between member and non-
sell their membership rights;
member green fees and between STARTING A BUSINESS
• Payments by members for social or
• If a club has had its exemption member and non-member bar and
recreational facilities provided directly Tips of the trade
approved, it risks losing its exemption restaurant income! Clubs would be
to the members (e.g. golf course fees
if it violates of any of the conditions well advised to start tackling these SKILL. DISCIPLINE. COURAGE.
or bar facilities);
of exemption. Under the worst case issues as soon as possible in order to Why our learners are leaders
• Fundraising activities of the club if scenario, the market value of its avoid the customary South African We’ll will be closing our doors from
those activities are of an occasional assets will be deemed to be taxable deadline rush. 22 December 2006 to 2 January 2006
nature and are undertaken by income (this would not be good for

www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected]
 A person will be remembered by the restricting access to income or capital.
DON’T SHOOT
THAT’S NOT CRICKET - OR FROM THE HIP
legacy he leaves. I refer to legacy in
the broader sense, not merely Rands
and Cents. Your will is your last word
to your loved ones and probably the
Although a will is a serious document
it is perfectly in order to personalise a
will. It does after all reflect the testators’
character and personality. An amusing
CAMERON & PRENTICE

C H A R T E R E D A C C O U N T A N T S

4TH QUARTER 2006 VOLUME 6

( S A )

SHOULD THAT BE ‘FORE’! It is imperative to

amend or update a
will for changes in
first document read by them after your
death. It is therefore important to
straighten out issues prior to death.
clause in a client’s will drafted in 1985
read as follows:
“ To the rest of my workers, in my
NEWS, VIEWS AT T I T U D E S O F A 2 1 S T C E N T U R Y F I R M

Recreational clubs currently qualify for tax

pecuniary or family
circumstances but,
Hurtful terms in a will should be avoided.
Do not try and triumph or win an
argument by having the last word in
employ at the time of my death, I
bequeath the sum of R10.00 (TEN
RAND) each so that they may rejoice
ONE THING YOU CAN’T LEARN
exemption in terms of section 10(1)(d) of
the Income Tax Act (the Act). In many
as Peter Prentice explains, an
impulsive change in anger or on a
momentary whim may result in a
your will.
Be cautious about including clauses in
and celebrate my departure as I rejoice
and celebrate departing from them.”
FROM A TEXTBOOK : EXPERIENCE
your will, which put your assets under So, I would suggest that you re-look
ways, clubs have received more
favourable tax treatment than Public
legacy of extreme unhappiness or just ask...
the control of someone who does not
have your family interests at heart. Do
at your will and decide if what is written
is still relevant and the way in which
Qualifying to put the esteemed CA designation after your name is a true accomplishment. But in
family division which no amount of order to achieve such an accomplishment, clerks seeking to become qualified Chartered Accountants
Benefit Organisations (PBO’s) in that they not try and impose unnecessary terms you wish to be remembered.
money or recompense will heal. in South Africa need to undergo a 3-year training contract either in an auditing or commercial
currently enjoy complete tax exemption for all income environment. Lara Forsyth sheds light on the rigors of the Cameron & Prentice training contract.
received, including trading income, whilst PBO’s are now
subject to tax on their trading income. There has been recent debate in the financial press regarding they can learn to see the bigger picture.
the IRBA and SAICA. And one issue has been made decidedly
Chris Norris examines the implications. clear. That is, to uphold the integrity of the profession and
At this point, we would also like to assure our clients that
Q: Is there VAT on the annual duty charged Q: And what are the benefits of qualifying each and every one of these trainees is a bright, highly
to maintain a standard that is accepted worldwide. At
by CIPRO? as an SBC? trained individual who shows promise in their chosen career
SARS has recently introduced provisions volunteers without compensation; a golf club with substantial value Cameron & Prentice we agree with this belief, which is why
into the Act to subject recreational / and locked up in its fairways!); A:The annual duty of R450 charged by CIPRO is a tax A: An SBC pays 0% tax on the first R40 000 of taxable and we have made it abundantly clear that they are to
we make sure that all our trainee staff members truly get
(stamp duty) and is not subject to VAT. Our invoices income, 10% on income between R40 000 and R300 000 deliver quality and unquestionable service during the term
sporting clubs to tax treatment similar to comprehend the skills, discipline and courage required
• Income from any other source (e.g. • Newly established clubs must apply reflect this duty separately and VAT is only charged on and 29% on any excess. This translates into a tax saving
to that of PBO’s. The new rules allow our fee for completing the annual return on behalf of our of R61 000 on a taxable income of R300 000. SBCs also of their engagement.
investment income and non-member for exemption before the end of their to practice the profession of chartered accountancy.
for a transition period for existing clubs clients. qualify for a 100% wear and tear allowance on
income) if that income does not first year of assessment whilst existing This demand may appear to be overwhelming for a first
but will apply to all new clubs that are manufacturing plant and machinery acquired and a Being a medium-sized firm, Cameron & Prentice is able to
exceed R20 000 per annum. clubs have until 31 March 2011 to year trainee fresh out of university, particularly when it
established after 1 April 2007. The 50:30:20 wear and tear allowance on other business
apply. Q: What constitutes an SBC for tax purposes? offer trainees excellent all round hands-on experience and
transition period for existing clubs • Expenditure in producing exempt assets. comes to administering an audit. But we have recognised
responsibility. All trainees are expected to manage their
effectively allows a period of four years, income will not be allowed as a tax It is unclear from the wording of the A: In order to qualify as an SBC (Small Business the gap between a student’s knowledge on exit from
Corporation) for tax purposes, the following criteria must assignments with the competence and professionalism of
up to 31 March 2011, for such clubs to deduction against taxable income; provisions whether or not a club that university, and the practical implementation thereof at the
be met: Q: Why can’t I claim VAT on car hire costs? a fully-fledged CA. And we expose our clerks to the inner
apply for exemption. allows non-members access to its start of an audit. Continued page 2
• In order to qualify for exemption, a functioning of our company and client’s business so that
facilities will qualify for exemption. • A CC or company (other than an employment
club must be established solely to A: The VAT Act specifically prohibits the claiming of VAT
Our view is that a club can still be said company);
The new rules will essentially work input tax credits on the acquisition of a motor car as
provide social and recreational • Owned by natural persons who don’t own shares in
as follows: to have been established solely to defined (essentially a passenger vehicle). It makes no
amenities of facilities for its members. any other company or CC (except listed shares, unit
provide social and recreational amenities difference how the car is acquired (e.g. cash purchase,
Exemption is not automatic and all trusts etc)
• All club income is now subject to clubs will have to apply to SARS for
or facilities for its members, even if it • Gross income not exceeding R14 million;
HP. lease or car hire) or what the car is used for, no
input tax can be claimed.
WHAT’S IN
income tax unless the income is allows non-members and guests of • Not more than 20% of income can come from
approval. SARS will only grant investment income or the rendering of personal
specifically exempt in terms of a new members to have access to its facilities. PERSONAL SERVICE COMPANIES
approval if the constitution of the services.
section – 10(1)(cO); It will however have to put systems Getting personal about tax
club meets certain criteria, which are
in place to track all non-member
• Section 10(1)(cO) provides for the very similar in nature to the criteria PLAYING THE TAX GAME
income, as only income from members
that a PBO’s constitution needs to
following types of income to be
exempt from tax: meet. In addition, members must
will be tax exempt. This is likely to be
challenging for most, if not all clubs,
(overheard) New tax for recreational clubs
be entitled to membership for at least IMPERATIVE OR IMPULSIVE
• Membership fees or subscriptions paid since it will have to distinguish for
one year and must not be allowed to Changing your will
by members; example between member and non-
sell their membership rights;
member green fees and between STARTING A BUSINESS
• Payments by members for social or
• If a club has had its exemption member and non-member bar and
recreational facilities provided directly Tips of the trade
approved, it risks losing its exemption restaurant income! Clubs would be
to the members (e.g. golf course fees
if it violates of any of the conditions well advised to start tackling these SKILL. DISCIPLINE. COURAGE.
or bar facilities);
of exemption. Under the worst case issues as soon as possible in order to Why our learners are leaders
• Fundraising activities of the club if scenario, the market value of its avoid the customary South African We’ll will be closing our doors from
those activities are of an occasional assets will be deemed to be taxable deadline rush. 22 December 2006 to 2 January 2006
nature and are undertaken by income (this would not be good for

www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected] www.campren.co.za t: 021 530 8444 f: 021 531 6600 [email protected]