Peri Formwork Scaffolding Engineering (Pty) Ltd v CSARS

Background:

The Appellant (“Peri”) submitted its Employer Reconciliation Declaration which was due on 31 December 2017, on 18 December 2017.

An amount of R 10 648 340.93 was due in terms of the return. Peri submitted the instruction for payment on e-filing on the same date as the return was filed to their bank, Nedbank, for payment on 3 January 2018. Due to insufficient funds at the time, payment could not be effected.

The payment of R 10 648 340.93 was ultimately made by Peri and received by SARS on Monday, 8 January 2018, when the payment was ostensibly due on Saturday, 6 January 2018.

The reason advanced for the late payment was that Peri was waiting for its debtors to make payment to it, and that based on historical payments, it had projected that payments received would cover its liability to SARS. This did not materialise, which necessitated Peri to request an overdraft from Nedbank in order for it to service its indebtedness to SARS.

Paragraph 6 (1) of the 4th Schedule: If an employer fails to pay employees’ tax within the prescribed period, SARS must impose a penalty equal to 10% of such amount.

This appeal relates to a 10% penalty of R 1 064 607.69 which was imposed by SARS for a late payment of employees tax pursuant to paragraph 6(1) of the 4th Schedule to the Income Tax Act (IT Act), together with interest thereon.

Issues:

 (i) Whether the payment was in fact overdue

(ii) Whether Peri had reasonable grounds for making the alleged late payment

Finding:

(i) To the first point, the High Court found that the payment was overdue despite Peri’s contention that the due date for payment had been incorrectly determined by the Tax Court.

Section 244 of the Tax Administration Act (TAA): If a due date or deadline falls on a Saturday, Sunday or public holiday, the action must be done no later than the last business day preceding the Saturday, Sunday or public holiday. [paraphrased]

The High Court held that section 244 of the TAA was in no way ambiguous and was correctly interpreted by the Tax Court. Accordingly, this ground of appeal failed.

(ii) To the second point, the High Court found that Peri’s action to raise additional funds (i.e. by way of overdraft with Nedbank) to rectify its lack of funds to pay SARS constituted a reasonable ground for purposes of remitting the penalty.

Section 217 of the TAA: If a penalty has been imposed in respect of a firs incidence of the non-compliance described in, inter alia, section 213 … SARS may remit the penalty or a portion thereof if SARS is satisfied that reasonable grounds for the non-compliance exist.

Peri contended that it immediately remedied its non-compliance and that it had never been non-compliant in the past.

The High Court held that “[Peri] could only effect payment on the first business day after requesting the overdraft on the weekend, which it duly did.  There was no prejudice to SARS and neither was there any mala fides indicated; to the contrary, every effort was made by [Peri] to comply with its obligations to SARS. This evidences reasonable grounds for the penalty imposed to be have been remitted, especially given the fact that it was a first incidence of non-compliance. In the circumstances, the appeal must succeed.”

Find a copy of the judgement here.

02/09/2021