Until the recent change in our tax laws, prescription of assessments (the expiry date of when SARS could still reassess a return submitted) in practically all cases took effect:

• After SARS issued an assessment – 3 years after the date of assessment
• After the taxpayer issued a self-assessment (such as VAT or your PAYE submissions) – 5 years after the date of the self-assessment

o If the taxpayer did not complete a self-assessment, 5 years after SARS issued an assessment
o In cases where no self-assessment was required, 5 years after the payment was due.

Having the certainty of fixed prescription periods is an important part of balancing honest taxpayer’s rights with the Commissioner’s right to collect taxes that are due. So why the change?

Why has SARS changed this?

Revenue argues that –
• An inordinate amount of time is often spent clarifying whether or not SARS is entitled to information which it requests.
• There are cases where the taxpayer is slow in providing requested information, knowing that prescription will soon come into effect.
• Finally, many of the cases are extremely complex and cannot be resolved before prescription takes effect.

What are the new prescription periods and how do they affect you?

To provide at least some balance for taxpayer’s rights, the new right to extend differentiates between less complex but obstructive cases and complex matters. In principle the former seeks merely to extend the period to match that which the taxpayer has obstructed SARS whereas the latter provides a stated maximum period to continue to audit and investigate complex matters irrespective of taxpayer assistance.

The two changes are reflected as follows:

1. Obstructive matters
If a taxpayer fails to provide SARS with “relevant material” within the time frame specified, then prescription may be extended by a period “approximate” to the delay in submitting the information.
Similarly, SARS may extend prescription by the time taken to resolve whether or not SARS was entitled to the information requested.
When SARS decides to extend prescription, the taxpayer is to be given a notice period of 30 days. This notice period is to be within the prescription time frames i.e. 3 years or 5 years from date of assessment.
As SARS determines what is “relevant material” and “approximate”, this gives Revenue wide latitude in watering down prescription and also no maximum period is prescribed.

2. Complex matters
Prescription may be similarly extended where a tax audit or investigation
relates to:

• The application of the doctrine of substance over form;
• Anti- avoidance provisions;
• The taxation of hybrid entities or hybrid instruments; or
• Transfer pricing provisions.
In this case a notice period of 60 days is required.

If you are about to face a tax audit or investigation in these areas (note that it is Revenue who decides if they are applicable), it will be important you provide information to SARS as timeously as possible. You will no longer have prescription time on your side.

If a taxpayer wants to contest these provisions, the tax law provides no objection or dispute process. You can only invoke (PAJA) the Public Access to Justice Act or a high court review of the decision which means going to court – a costly exercise.

The powers given to SARS are widespread – it is important to seek expert advice if you face an extension of prescription for assessments.