Monthly Archives: May 2013

Nicholas Newman

Nicholas Newman competed in the African and South African bi-Athlon Championships (Running and Cycling) in Potchefstroom. He ran a 5km, 20km cycle and then 2.5km run (all after each other) he completed this in a time of 1:08:06. He came second and received a silver. Nicholas is a Paralympic javelin champion and this bi-Athlon is a discipline he is competing in.

Nicholas Newman

SAICA Free State Annual Dinner

SAICA Central Region presented the Queen Experience with Joseph Clark at the 2013 Free State Annual Dinner, proudly sponsored by Syspro. Joseph has become well known for his powerful interpretation of Queen’s music, making this an event not to be missed. This glamorous event held at Ilanga Estate was filled with good food, wine , entertainment and great company. Success Lekhabe presenter at OFM acted as master of ceremonies and had a big contribution to this successful evening. Chartered Accountants from Newtons who attended the annual dinner really had a night to remember.

 

SAICA Free State Annual Dinner (6) SAICA Free State Annual Dinner (5) SAICA Free State Annual Dinner (4) SAICA Free State Annual Dinner (3) SAICA Free State Annual Dinner (2) SAICA Free State Annual Dinner (1)

Annual Practitioner’s day at UFS

Newtons participated in the Annual Practitioner’s day at the University of the Free State. This event gives Auditing and Accounting Firms exposure to students currently studying in this field and vice versa. Newtons held a competition and an Apple iPod was up for grabs. The lucky winner was Iziwe Mameza 2nd year B.Acc Student. He was interviewed by the The Weekly Newspaper and they then published an article on him.

Practitioners Day (7) Practitioners Day (6) Practitioners Day (5) Practitioners Day (4) Practitioners Day (3) Practitioners Day (2) Practitioners Day (1)

 

Newtons has once again created history with Abacus Payroll Software

Newtons has once again created history by becoming the first agency in the Free State for Abacus Payroll Software. This confirms our commitment to our clients to provide them with affordable and easy to use products that will save them time and money and help them focus on what is most important to them. Six of our staff attended the training session hosted by Abacus’ Shaun Kelly and Basil Forssman on Monday, 20 May and will be able to assist clients with queries while two staff members have been certified by Abacus as installers and trainers of the programme.

Abacus (2) Abacus (3) Abacus (1)

Family Business Stories

familybusiness

  1. James and Sarah have been avoiding each other like the plague for more than a week now. Sarah joined her husband James a year ago in his construction business as the accountant. They have been locked in battle since day one: About who must do what, how much time she can take off for home and children, finances, staff etc. There was an incident in front of the staff in which she threw his cell phone at him and he kicked a hole in the door and then disappeared for two days. The business is suffering because they don’t talk, postpone decisions and nobody supervises the staff.
  2. The van der Merwes have a farming family business consisting of a father and two sons. The eldest son joined the business directly after school but the youngest went to college first.  He got married and joined the business a year ago. The father still manages the business and pays the sons the same salary. The eldest brother’s wife is very unhappy with this. She feels her husband slaved for many years while his brother had a ‘jol’ at college. Now he gets the same salary! On top of this the business is paying to renovate the youngest son and his wife’s house on the farm. Daughter-in-law one has been asking for a long time now to have an extra bathroom added to their house. The excuse is every time: ‘There is no money’. Mother has added her bit by dropping a hint that she does not see the need for an extra bathroom – they have coped with one bathroom in their house for more than 30 years. The family did not get together last month for the youngest grandchild’s birthday and the father and sons have held no management meetings in the last two months.
  3. The Smith family business is a third generation engineering works. It was started by the grandfather and continued by his only son. When he died his two sons and daughter inherited the business. The sons are active in the business, following in their grandfather and father’s footsteps. The daughter lives in Canada and quarterly receives her share of the profit. The business is suffering in the current economic climate and struggles to make ends meet. The brothers asked their sister to take a much smaller share as she does not work in the business. She refused and the family is now involved in a legal wrangle at great cost in terms of money, time, and energy spent on the business.

A family business can be defined as a business where a single family owns at least 51% of the equity of the business; where a single family is able to exercise considerable influence in the business; and where at least two family members are concerned with the senior management of the business.

The dilemma is that between two-thirds and three-quarters of family businesses either collapse or are sold during the first generation’s time. Only 5-15% make it to the third generation. Some international research shows that only one out of 10 family businesses make it to the second generation. Other research shows that only one in four family businesses in South Africa survive into the second generation, while only one in 10 make it to the third generation.

Family businesses differ from other types of business. The non-family business is only focused on the interest of the business. Family businesses are about the interest of the business AND the interest of the family. And this is where difficulties and conflict develop, as seen in the three family business stories at the beginning of this article. Conflict develops in the overlap between the business and the family.

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The goals of a family are generally to nurture, develop, and support family members. In contrast, firms use profits, market share, efficiency, and other economic criteria to measure performance. Research on family firms indicates that family goals and needs often are the deciding factors in many businesses’ decisions and strategies. It is not the business that makes a family business different from other business arrangements; rather, it is the family. Keeping family separate from business is therefore harmful, as it attempts to extract the one thing that gives a family business its advantage over its non-family business rivals. In other words, a family business that is able to extract and separate the family element from the business will lose the one element that makes family businesses unique and allows them to outperform non-family businesses. Family influence is the one thing that is unique to family businesses, and could be regarded as a resource to a business.

Family influence as a resource is referred to as `familiness’. It is the unique bundle of resources a firm has as the result of the interaction of the family, the firm and individual family members with one another. Familiness is regarded as a capability, in the sense that it is firm specific, embedded in the firm and its processes, and is not transferable to other firms.

But family firms also have unique qualities, problems and challenges. They have unique psychological processes fostered in the closed environment of the family business. As one client put it: “At least you don’t have to love your colleagues in a non-family business!” The intertwining of family and business concerns is at the core of the issues and questions that surround family businesses. The Price Waterhouse Coopers Family Business Survey,  Kin in the Game, found that the ability to manage differences of opinion smoothly is now more important than ever, but less than a third of family businesses have introduced procedures for dealing with disputes between family members.

The dynamics in family businesses become more complex and the problems multiply exponentially when more than one family unit becomes involved, with siblings ending up working together. The multi-family ownership requires a unique combination of people skills and attitudes to make it work and special steps to avoid intra-family conflict. Working side by side presents challenges of high intra-familial stress, strain, and conflict, especially when the family lacks skills in communication, problem solving, goal setting, conflict resolution, and strategic planning.

Couple businesses are a unique form of family business with the potential to be highly successful. But they also have the potential to damage or destroy either the marriage (and the family) or the business. (In most cases the business in any case collapses when the marriage collapses). Running a successful business and having a fulfilling marriage requires specific steps and skills.

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice.

VAT: A few important things to remember when claiming Input VAT

vat
Input VAT is the VAT that you pay on your purchases and which you can claim back from SARS.
SARS has increased their vigilance with verifying VAT returns. By following the next basic rules about input VAT you can avoid costly penalties levied on mistakes made when completing your VAT return.

1.You must hold a valid tax invoice for all purchases more than R50 on which you want to claim input VAT. The following information must be on the tax invoice:

  • The words “Tax Invoice”
  • The name and address of the supplier
  • The VAT registration number of the supplier
  • The date of the tax invoice
  • A serial number
  • A description of the goods or services
  • The value, the amount of tax and the total

NB => where the supply is more than R5,000, the following additional information must also be on the tax invoice

  • Your name and address =>this must be the name of your business that is registered for VAT
  • Your VAT registration number
  • The quantity or volume of goods/services supplied

If you have not yet received the tax invoice for a particular supply, you may only deduct the input tax in the tax period that you obtain the document. However, you must deduct the input tax within a period of five years from the date on which a tax invoice for that supply should have been issued.

2. You must make adjustments to input VAT claimed when the original invoiced amounts changed, for example when you receive discount for early payment or when the original price is increased or decreased.

  • The supplier must issue a debit or credit note to you in the above situations. Debit and credit notes must contain similar information to tax invoices.

3. You must pay the supplier within 12 months from the date that you claimed the input VAT on the purchase. If you have not paid the supplier within 12 months, you must pay the input VAT back on the portion which you have not paid. This rule does not apply where there is a written contract which provides for the payment after twelve months. The contract date will then apply.

4. Never claim input VAT on the following purchases unless some special rule applies to you.

  • Motor vehicles, station wagons, combis or double cab bakkies (including rentals)
  • Subscriptions to sport clubs or other similar recreational clubs
  • Rugby or cricket tickets, etc.
  • Most entertainment expenses
  • Tea, coffee and other refreshments for your staff
  • Petrol or diesel (unless you’re a farmer or a fisherman qualifying for diesel refunds)
  • Life insurance payments

5. You may claim VAT when you buy second-hand goods to be used in your business from a non-registered person. The following rules must be followed:

  • The goods must be second-hand => the goods must have been used and owned by someone else before you bought it. Animals are not second-hand goods.
  • You can only claim the input VAT on what you have actually paid. To calculate the input VAT that you may claim => 14/114 x payment
  • You must have a copy of the VAT 264 form completed by the seller, to which must be attached a copy of the identity document of the seller (or registration details if the seller is a company, CC or trust) VAT Form 264

6. Remember to claim the input VAT on the following. Quite often our clients forget about these:

  • Bank charges => your bank statement will in most instances comply with the requirement of a tax invoice
  • Short term insurance payments for your business => make sure your policy contains all the relevant and correct information
  • Other monthly debit orders on business expenses, such as payments to your alarm company => you must still hold a tax invoice; insist that they send it to you monthly.
  • Bad debts written off => you may claim the input VAT when you write off debt as an adjustment to input VAT. Note that the debt must be written off in your books and you must stop trying to collect it, or you must have handed it over for collection.

For more information on the mechanics of VAT, we recommend you down load the latest version of the SARS Value-Added Tax Guide for Vendors on the SARS Website. Should you come across a complex transaction, or are uncertain about the VAT treatment, contact your tax specialist at NEWTONS.

Source: Lucha Greyling (Partner) Newtons Chartered Accountants.

Company car or Car allowance?

companycar
To quote Hamlet:  “Company car or car allowance that is the question”  

(I am sure if he lived in the 21th century he would have asked it exactly like that)

This question of tax on fringe benefits is a difficult one.  Do I choose a company car or do I go for a travel allowance or should I just reimburse the KM travelled?

The most important thing that any taxpayer must remember is how important a logbook is in all 3 situations above.  I always tell my clients that the only way to prove your business kilometers is by completing a logbook.  You will feel that it is a waste of your time, but at the end of the tax year you will save money. Without a logbook no deduction is allowed.

TRAVEL ALLOWANCE    Actual Costs vs Deemed Costs

Actual costs:

Actual costs must be substantiated by a logbook as well as actual cost incurred on the vehicle.  Actual costs include the following:

  1. Fuel and Oil
  2. Repairs and Maintenance on vehicle
  3. Wear and Tear – over 7 years and cost is limited to R480 000
  4. Finance charges – limited to a cost of R 480 000
  5. Insurance on Vehicle
  6. Car tracker
  7. Finance Lease payments – limited to a cost of R 480 000

Deemed Costs: Below are the new rates for calculating the travel allowance for your vehicle

Value of the car Fixed cost Fuel cost Maintenance Cost
R (including VAT) Rand per annum Cents per km Cents per km

0 – 60 000

19,310

81.40

26.20

60 001 – 120 000

38,333

86.10

29.50

120 001 – 180 000

52,033

90.80

32.80

180 001 – 240 000

65,667

98.70

39.40

240 001 – 300 000

78,192

113.60

46.30

300 001 – 360 000

90,668

130.30

54.40

360 001 – 420 000

104,374

134.70

67.70

420 001 – 480 000

118,078

147.70

70.50

exceeding 480 000

118,078

147.70

70.50

80% of the travelling allowance must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that at least 80% of the use of the motor vehicle for the tax year will be for business purposes.

No fuel cost may be claimed if the employee has not borne the full cost of fuel used in the vehicle and no maintenance cost may be claimed if the employee has not borne the full cost of maintaining the vehicle (e.g. if the vehicle is the subject of a maintenance plan).

The fixed cost must be reduced on a pro-rata basis if the vehicle is used for business purposes for less than a full year.

The actual distance travelled during a tax year and the distance travelled for business purposes substantiated by a log book are used to determine the costs which may be claimed against a travelling allowance

Reimbursive allowance

Non-Taxable reimbursive allowance was increased to R 3.24 cents per km if employee does not travel more than 8 000 km per annum

Taxable reimbursive allowance: If reimbursed more that prescribed rate or travelled more than     8 000 km per annum

Taxable reimbursive allowance does not have to be included in the employee’s remuneration for PAYE purposes.  To claim travel expenses against the taxable amount – normal travel allowance rules apply.

COMPANY CAR

Employer-owned vehicles

Determined Value for fringe benefit:

  1. Cash cost incl. VAT, but excl. finance charges and interest
  2. Taxed on 3.5% per month of the determined value of the vehicle less any consideration paid by the employee towards the cost of the vehicle
  3. Reduced to 3.25% if vehicle is subject to a maintenance plan for no less than three years and/or 60 000 km

80% of the fringe benefit must be included in the employee’s remuneration for the purposes of calculating PAYE. The percentage is reduced to 20% if the employer is satisfied that 80% of the mileage will be for business purposes

 

No value is placed on the private use of a company owned vehicle if:

  1. It is available to and used by all employees, private use is infrequent and incidental to the business use and the vehicle is not normally kept at or near that employee’s residence when not in use outside business hours (pool car)
  2. The nature of the employee’s duties requires regular use of the vehicle for the performance of duties outside normal hours of work and private use is infrequent or incidental to business use or limited to travel between place of residence and place of work

Employer-leased vehicles

Where the vehicle is acquired by the employer under an operating lease the taxable value is the cost incurred by the employer under the operating lease plus the cost of fuel.3

This value can then be reduced for proven business use by using business kilometers travelled as a percentage of the total distance travelled.

CONCLUSION

It is always nice to get more out in a month, but at the end of the year it can cost you money.  Structure you salary package so that you can save money on tax. If you are unsure about the tax consequences of the salary package, seek advice from us your tax specialist.

Source: Janeske du Toit (Manager) from Newtons Chartered Accountants.