Legal – Rust Gold

While South Africa is currently in a state of lockdown during which a significant number of businesses have had to cease operations, some relief from a tax perspective has been announced by the government. Tax-compliant businesses with a turnover of less than R50 million will be allowed to defer (importantly, not have waived) 20% of their pay-as-you-earn liabilities over the next four months, and a portion of their provisional corporate income tax payments, without penalties or interest over the next six months.

There is, however, a legal and practical difficulty in the proposed relief.

Legal

While President Ramaphosa and his Cabinet have alluded to these relief mechanisms, they remain part of the Executive arm of Government. They cannot make law and amendments thereto; that is a function and privilege of the Legislature (Parliament). Without such relief mechanisms being legislated, SARS must impose penalties and interest on late- or short payments in line with existing legislation. It is highly unlikely that Parliament will be convened to make amendments to tax acts to accommodate for the relief. So, what can be done?

SARS can, through a so-called “practise generally prevailing” set-out their application of a tax act. Such a “practise generally prevailing” should be contained in an official SARS publication, which includes a Practise Note. It could, therefore, be considered that SARS issues a Practice Note to indicate how they will apply specific provisions which impose penalties and interest in certain instances. Although not yet tested in law, it is one of the options that could be considered to attach legal consequences to the relief mechanisms which have been proposed. It will be interesting to see what SARS decides to do in this case.

Practical

Persons who deal with compliance related matters will be well aware that penalties and interest are imposed automatically on statements of account when payments are submitted late, or short payments are made. Systems trigger these penalties and interest. Even though SARS’s eFiling system is one of the best electronic filing systems globally, it is unlikely that changes will be made thereto on such short notice.

Unless there is manual intervention from a SARS official, taxpayers who make use of the relief mechanisms, will automatically find themselves in a dispute process. Even though they are fully entitled to the relief (on the assumption that the relief gets properly legislated as indicated above), they will have to go through the process to have penalties and interest remitted.

We suggest, that before any of the relief mechanisms are utilised, taxpayers consult with advisors to ensure that firstly, the relief is legally available, and secondly, how they must manage the dispute process.

This article is a general information sheet and should not be used or relied on as legal or other 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. Errors and omissions excepted (E&OE)

This article discusses claims making use of the Small Claims Court. It specifies what the benefits are of approaching the Small Claims Court and who would have locus standi to do so. The article then establishes what Small Claims Court proceedings entail and briefly provides relevant information regarding judgments by this Court.

The Small Claims Court provides a prompt and inexpensive way to resolve minor disputes. It is meant for the ordinary man and woman on the street who cannot afford civil litigation. In particular, the Small Claims Court can benefit the destitute and indigent in South Africa to be able to access justice in a very informal, cost-effective, and user-friendly manner.

The Small Claims Court is governed in terms of the Small Claims Court Act 61 of 1984 (‘the Act’) which is established for a time and cost-effective mechanism for those who have a claim against another party. The Small Claims Court is for anyone who wants to institute a minor civil claim against someone else. You can also institute claims against companies and associations.

However, the claims are limited to amounts that are less than R15 000. This excludes the State, meaning a person cannot, for example, make a claim against a local municipality. Claims brought to the Small Claims Court are dealt with quickly and cheaply without claimants having to appoint an attorney, and anyone, except juristic persons, are allowed to make use of this forum.

What does the process entail?

The procedure of lodging a claim in the Small Claims Court is fairly easy and straightforward. As in the case of most litigious claims in other courts, claims should initially be instituted by way of a letter of demand, which must be sent by registered post or be hand-delivered. In the letter of demand, one should set out all the relevant facts which give rise to one’s claim, and specify the amount being claimed. The party instituting the action should give the opposing party 14 working days in order to settle the claim, which is calculated from the date of receipt of demand by the defendant.

The Act provides that upon proof submitted to the clerk of the court that the requirements regarding the letter of demand have been complied with; and if the clerk of the court is satisfied that the plaintiff is a natural person; and that the summons comply with the prescribed requirements, the clerk of the court shall set a date and time for the hearing of the action and issue the summons. The summons will then be served on the defendant personally or by the sheriff of the court.

The hearing:

The claimant and the defendant must appear in court in person and the hearing will be chaired by the commissioner. Commissioners in the Small Claims Court are usually experienced legal practitioners. Remember that all the documents on which one’s claim is based should be brought to the hearing, as there is no point in showing up empty-handed. The Small Claims Court proceedings are basic and straight-forward. No legal representatives such as attorneys or advocates are involved in the proceedings, which contributes to the cost-effective nature of this mechanism. As the proceedings begin, answer any questions that the commissioner of the court may ask.

The judgment:

After the hearing of the action, the judgment will be given by the commissioner, which becomes final and enforceable. If the commissioner grants judgment in your favour, he or she will usually ask the defendant how the debt will be settled. The commissioner can make an order for payment by instalments. If no such order is made and the defendant does not pay or settle the judgment within two weeks, one can enforce this judgment by execution in the Magistrate’s Court. It must be noted that a judgment in the Small Claims Court is not appealable but may be taken on review.

Sources:

Small Claims Court Act 61 of 1984
Small Claims Courts: Guidelines for Commissioners

Tax relief amid COVID-19

When to make use of the small claims court