SARS Headache

theratman

theratman

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Hoping to get some advice from more knowledge chaps.

I received an inheritance via a trust last year and decided in Jan 2014 to take it and purchase an investment property. I bought the property for 1.2 and paid just under 200k on provisional tax in Feb 2014 (due to the payout from the trust) as advised by accounting firm.
Everything was fine and dandy until I did my tax return in September. The return looked fine and they owned me money(a few k) for medical aid(I pay around 5k pm)
After a week or two of no payment I have a look and see that I'm being Audited,no problem as I've done nothing wrong.
They completed the audit and requested updated banking details from me which I put in,I asked the lady to confirm the total of the return and she told me it was just shy of 195k due to the provisional tax I'd paid earlier in the year.
This seems very wrong and I've asked them to double check it for me.
I'm not sure why they would want to pay the provisional tax back to me that I paid in Feb?

Any help / advice would be greatly appreciated.
 
I'm not an expert but perhaps the trust was taxed already. I think your best bet is to consult with the accountants who told you that the provisional amount had to be paid.
 
Without knowing all the details of what the exact inheritance was at the time that it accrued to you, it is difficult to answer.

One thing is certain and that is that either your provisional return or income tax return was wrong.

Is it a testamentary trust, i.e. A trust created on the death of someone and you were listed as one of the inheritors?

Who submitted your IRP6 & ITR12?
 
Thanks for the replies guys
It was a trust set up for use after the person's passing,I'm currently listed as a Trustee. I'm pretty green wrt to most of this and signed here and there.
The accounting firm that was looking after the trust advised the provisional tax be paid and they submitted all the required documents.
I'm assuming they must've done something wrong or sars are over looking some thing even after the Audit. I'm sure my Tax return was done fine as I made a mistake on the first one and had an account friend help me with the correction. The amount I was due after the second one was around the same figure we'd worked out.

There is a possibility that the trust was taxed but I was advised to pay the provisional tax as I was receiving a fairly large income. All I can come up with is that they think I've overpaid as the funds never cane directly into my account, I had them directly transferred from the trust to the beneficiary.
Either way I'm going to have to get hold of the accounting firm on Monday and get some details from them
 
Well either way just jam the money into some kind of "safe" interest bearing product (call deposit etc).

If the sht hits the fan and they want their money back then that looks best. i.e. "I was unsure so I ringfenced it and invested it so that I could return it to its rightful owner with interest". e.g. If that shows up in court the judge will likely deem that as (very) responsible/reasonable behaviour given uncertainty.

>There is a possibility that the trust was taxed but I was advised to pay the provisional tax as I was receiving a fairly large income.

That is likely the cause. Inheritance isn't income afaik (or rather it is but is exempted?)...its taxed on the estate side and usually falls below the threshold. Not sure how a trust in between this factors in though so can't be sure.

All things considered I'm inclined to say that the refund is probably legit. If you're unsure do the interest bearing thing I mentioned and sit on it until you're sure.

Still - you're right ask the accounting firm.
 
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From your answer, your IRP6 is correct and your ITR12 might have a few errors.

A trust is a conduit mechanism and income that accrues to of the trust gets taxed in the hands of the beneficiaries. On mobile so thus is just the simple answer. It can get complicated.

You will have needed to declare the income that the trust earned that accrued to you on your tax return as if you earned it.

SARS has just completed a major reform of trusts with the new trust tax return changing from a simple 2 page document to over 20 pages.

The refund is probably incorrect and is based on your inaccurate tax return.
 
Just reread your answer.

So the trust is a testamentary trust. The assets were put in this trust after the persons death and then paid out to the beneficiaries?

If this is the case then the refund is legit and you should not have paid the provisional tax in the first place.

The example above is more in line with an inter vivos trust.

Your accountant should be able to clear it up.
 
Thanks for all the feedback guys,really appreciate it

signates said:
So the trust is a testamentary trust. The assets were put in this trust after the persons death and then paid out to the beneficiaries?
Click to expand...

From my understanding the Trust was set up a few years back by the deceased for use after their passing. The Trust had most of the assets in before the passing the remainder went into the trust after the passing. So the Trust inherited the assets which it passed along to the trustees. I know there mention of it being beneficial for the estate tax wise, I really should have been more involved but hindsight is always 20/20.

At the end of the day if everything is fine I'm going to put it in an accessible account incase sars comes knocking.
 
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Then my first answer stands and the capital gains would accrue to the beneficiaries and will need to be declared on their income tax returns.

Trusts are no longer the tax efficient vehicles they user to be.

SARS will come knocking.

Request a correction on your tax return and get the accountant to submit it correctly.
 
If it is an inheritance you received it is tax free as it would have been subject to estate duty in the hands of the deceased. In other words it was already subjected to tax.

The only time you as the heir will have to pay the estate duty is where you inherited an asset subject to estate duty and there was no liquid assets available in the estate to pay the tax, and you dont want to sell the asset to pay the tax. This is a separate issue from your income tax though.

Bottomline is that if an inheritance is what you received, it should not be subject to income tax in your hands as it was already subject to estate duty.
 
signates said:
Then my first answer stands and the capital gains would accrue to the beneficiaries and will need to be declared on their income tax returns.

Trusts are no longer the tax efficient vehicles they user to be.

SARS will come knocking.

Request a correction on your tax return and get the accountant to submit it correctly.
Click to expand...

Signates is correct. There was probably taxable income/taxable capital gains which were vested in the hands of the beneficiaries of the trust. (i.e. taxed in the hands of the beneficiaries to save on tax). Either the accountant forgot to give you the figures for inclusion in your tax return or you did not include these in your tax return.
 
EnT@nGleD said:
Signates is correct. There was probably taxable income/taxable capital gains which were vested in the hands of the beneficiaries of the trust. (i.e. taxed in the hands of the beneficiaries to save on tax). Either the accountant forgot to give you the figures for inclusion in your tax return or you did not include these in your tax return.
Click to expand...

Good point, I did not include the funds on my tax return, I was under the impression they'd picked it up after they did an audit on me (I had paid the funds as provisional tax)
So basically I buggered up my personal tax return by not declaring that I'd received the funds? (Should they not have picked this up in the audit?)
 
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I'm always annoyed with the gov wrt inheritance and tax thereof. Think about it.. Tax on the inherited value was paid during the lifetime of the deceased the exception being life insurance. So why does there have to be another tax for transfer?

This is why a lot people I know have had their parents transfer funds during their lifetime (100k? Or is 200k? Per annum is tax free) to them so that they exempt from tax. If you ask me, it's one the stupidest things in life for gov to claim funds from inheritance as well as estate duty both of which can easily eat thru 20-30%?

Hrm shuttleworth should fight that battle..
 
krycor said:
I'm always annoyed with the gov wrt inheritance and tax thereof. Think about it.. Tax on the inherited value was paid during the lifetime of the deceased the exception being life insurance. So why does there have to be another tax for transfer?

This is why a lot people I know have had their parents transfer funds during their lifetime (100k? Or is 200k? Per annum is tax free) to them so that they exempt from tax. If you ask me, it's one the stupidest things in life for gov to claim funds from inheritance as well as estate duty both of which can easily eat thru 20-30%?

Hrm shuttleworth should fight that battle..
Click to expand...

Absolutely right. It's is the vilest form of tax that there is. Completely immoral and probably unconstitutional and illegal as well but until someone with very deep pockets actually challenges it (which the government and SARS bank on not happening) it stays.
 
So SARS in all it's wisdom deposited the funds into my account this morning. :(
Still waiting to hear back from the accountants.
 
Thread Necro but there has been something of a resolution - all I have to say is F@#k sars.
They finally realised their mistake and sent me a tax bill for the monies owedm which included close to 10k of "interest" at 7%! Accountants say that there is no point appealing as they will decline to remove the interest. Expensive lesson.
 
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