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SARS and Business Rescue – Part 3

November 23, 2015

Given the relatively short timeframe to which the work of the Business Rescue Practitioner (BRP) is subject, a full due diligence investigation of tax issues and compliance cannot be undertaken and the BRP cannot warrant the information upon which returns and submissions are made.

In our opinion reasonable care in preparation of the plan, which includes consideration of the tax and administration, will suffice to meet the requirement that the BRP not act negligently.

The duties of the BRP include, but are not limited to ensuring that

  1. all statutory returns to SARS are filed timeously and are accurate to the best of his knowledge and belief;
  2. all taxes collected during the business rescue process are paid to SARS when they become due;
  3. the staff in the business charged with tax compliance are performing their duties;
  4. tax disputes are properly disclosed in the business rescue plan where they can have a material impact on the opinion of affected parties who are voting on the plan;
  5. SARS are in a position to vote as an affected party and have been consulted in the formulation of the business    rescue plan; and
  6. where relevant, the tax clearance certificates are issued by SARS to protect the business with the state and its entities where such a certificate is required as part of the contractual obligations of the business.

A tax clearance certificate is issued in terms of the Tax Administration Act and SARS’ discretion cannot be overridden. A separate application for a tax clearance certificate must be made in terms of the Tax Administration Act.

The general duties of directors require appropriate action be taken when fraud is encountered. Where appropriate, the BRP must consider the impact of fraud. The BRP is required to report fraud to the appropriate authorities which include SARS and the Special Investigations Unit for Serious Economic Crimes (SIU).

Extract from TMA Practice note.

Disclaimer: The contents and information provided above are generalised and must not be acted upon as legal advice.