If you run a small business, you must still follow the strict guidelines for company tax returns applicable to medium and large businesses. It can be stressful, as you do not have the manpower, tax expertise at hand, and the time to manage the filing of company tax returns.
Record keeping plays an important role in staying tax compliant. Do not even consider filing your company tax returns and claiming deductions for expenses if you do not have meticulous record keeping in place. It is essential for the records to clearly show the company income and expenses. You need to keep all the information needed for entries made in your company tax returns.
Supporting documentation is essential. You need to have proof of paid accounts, receipts for payments, bank statements, cancelled checks, proof of EFTs, and more, which must be properly organised and stored in a safe place.
If you manage a small company or are a sole proprietor, do not mix your personal income with business income. Make sure that you have two separate bank accounts and use only the company business account for business expenses. Request statements, invoices, and receipt of payment advices for everything. If you take a customer to lunch, make sure that you have the customer’s ID number or business details if you plan to claim for entertainment expenses. If you want to claim repairs, maintenance, parking, and fuel, then you will need to keep a logbook for each of the vehicles owned by the company.
Your records must reflect the liabilities, assets, loans, profits, undrawn profits, evaluation of assets, and more. You must keep a fixed asset register to this end as well. Keep detailed record of any cash receipts and payments made using cash. This also applies to credit-based purchases and sales. Keep record of the parties involved.
You need to pay provisional, employee, and director remuneration taxes. As such, the company tax returns can become rather complex, leaving room for error. Any mistakes in the filing of the returns can lead to unpleasant audits and penalties.
Avoid complications with the filing of company tax returns by making use of a tax specialist to help you draft a strategy in line with your company’s business strategy. This will also help you to address tax challenges effectively. Be sure to select a consultant that is registered as a tax practitioner with SARS.
Disclaimer: This article is for information purposes only and does not constitute legal, tax, or financial advice. Call on us for professional legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing – August 2018.