Sole-Proprietors: PAYE being auto-deducted by client

[MisterBigglesworth]

A question for sole-proprietor's aka the one man band heroes

I worked for my company full time, resigned and am now working for myself as a sole proprietor. I have a consultancy agreement with my previous company for X hours a month, so I work from home and trying to get something started. I sent my first invoice to them and they have told me they are taking off PAYE. I was under the impression a SP manages their own tax portion and needs to do provisional tax returns?

They are saying I basically am a Personal Service Provider because 80% of my revenue comes from them, and because of that they take off the PAYE. Reading up about PSP's, they refer to "companies" and "trusts"...I am not either.

So can anyone please explain in layman's terms how the PAYE should be dealt with as a sole proprietor?

 

[jem]

No, it is a valid thing. While they are the majority of it they are allowed (in fact I think it may even be required) to deduct tax on your behalf. You still complete a provisional return so basically they are just splitting your tax into 12 payments on your behalf instead of you just completing 2 annually.

You will still be able to deduct any legitimate business expenses

 

[MisterBigglesworth]

Ok I see. So my office in my house I set up, my internet etc all those normal things that would be legitimate business expenses I can still deduct?

 

[jem]

The office part you can deduct a portion of your rent/bond as per percentage of property size. same with elect etc.
Other stuff depends on the specifics. You should download the guide from sars and/or get some proper advice initially to make sure you deduct whatever you can to the fullest.

 

[MisterBigglesworth]

Thank you , will search for the guide

 

[jem]

oh and the office has to be a dedicated area, it can't be like your dining room table (technically)