Discovering an old tax mistake can create a difficult decision for a taxpayer.
The issue may involve undeclared income, incorrect historic returns, overstated deductions or another form of tax non-compliance. Ignoring the problem can create further risk, but correcting it without first understanding the available legal processes can also have significant consequences.
One mechanism available to qualifying taxpayers is the SARS Voluntary Disclosure Program.
The Voluntary Disclosure Programme, commonly referred to as VDP, exists to allow qualifying taxpayers to voluntarily disclose certain tax defaults and regularise their affairs with SARS.
SARS states that the permanent VDP is available to qualifying individuals, companies and trusts seeking to voluntarily regularise their tax affairs. Applications are made through SARS eFiling.
Importantly, VDP should not be viewed simply as a form that a taxpayer completes after discovering a mistake.
There are requirements that must be considered.
According to SARS, a qualifying disclosure must, among other things, be voluntary and full and complete in all material respects. Other statutory requirements also apply, and the circumstances surrounding the default can affect whether the application qualifies for relief.
This makes timing particularly important.
A taxpayer who identifies historic non-compliance should ideally assess the position before taking action that could affect the available options.
The first step should be understanding exactly what happened.
Which tax periods are affected? What type of tax is involved? What caused the default? What records are available? Has SARS already identified the issue? What potential tax, interest or penalty exposure exists?
Only after developing a clear picture can the taxpayer properly consider whether VDP is an appropriate route.
A well-prepared application also requires accurate information.
SARS’s own VDP guidance stresses the importance of the disclosure being full and complete in all material respects. Relief can potentially be withdrawn if SARS subsequently determines that a disclosure was not valid and complete.
This is one reason complex VDP matters are often approached with specialist assistance.
Unicus Tax has a dedicated practice dealing with SARS Voluntary Disclosure Programme applications and advises taxpayers on the strategy, preparation and handling of VDP matters. Its approach emphasises assessing the circumstances before submission rather than treating voluntary disclosure as a simple administrative exercise.
For businesses and individuals facing historic tax issues, the important principle is to deal with the problem deliberately.
Discovering past non-compliance does not mean every taxpayer automatically qualifies for VDP, nor does it mean the same strategy is appropriate in every case.
The correct approach is to establish the facts, understand the potential exposure and determine whether voluntary disclosure is legally and commercially appropriate before proceeding.